Have branchless banking pilots and well-defined regulations paved the way to greater inclusion in Indonesia?

Around this time last year, I had just returned from Jakarta, where I was preparing for the first year of InterMedia’s Financial Inclusion Insights research program in Indonesia. At the time, my impression was that awareness of mobile money services and their functionality was extremely low, even though mobile money had been available in the country since 2007 through services such as T-Cash. Months later, our survey data confirmed my initial impression.


Source: InterMedia Indonesia FII Tracker survey (N=6,000, 15+) August-November 2014.

Based on financial inclusion stakeholder discussions, lack of awareness, in part, was attributed to providers’ reluctance to promote the services amid regulatory uncertainty. Regulations governing the provision of mobile money and digital financial services had been in a state of flux since the introduction of T-Cash in 2007. So understandably, service providers may have been reluctant to invest in a product or component to a product that could be permissible one day and prohibited the next.

Looking at my trip last year, few, if any, shops purported to be mobile-money compatible had signage for any of the number of mobile money services offered in Indonesia. I remember walking into stores, such as Indomaret, and asking clerks if I could use T-Cash. Even with the help of locals, the response was always that they didn’t know what T-Cash is.

Flash forward to July 2015, I found that much had changed on the ground in 12 months.

I arrived in Jakarta in late July, and was quickly struck by the visibility of mobile money services around the city. Whereas before, I could have spent a day or two just looking for signage promoting the services, only to find nothing, I now came across signs without having to seek them out.

Anecdotally, consumer awareness felt higher. In conversations with our local partners and respondents in the pilot interviews, mentioning a brand such as “T-Cash” or “Rekening Ponsel” was no longer met with a confused look. Now, people had at least heard of a few brands, if not used them.

As I took notice, one of the things that struck me was that this sudden increase in presence wasn’t just from the old guard in T-Cash. Rekening Ponsel from CIMB Niaga was a new entrant to the market, arriving in 2014, and appeared to be as widely advertised as services with a longer history in Indonesia, such as T-Cash.

Seeing this contrast, I thought it worthwhile to dig deeper and try to uncover what factors may have led to this sudden change in the market. What I found was that one of the major shifts that may have acted as a catalyst for this took place on the regulatory side.

In mid-2014, the government released updated branchless banking regulations focusing on the provision of digital financial services (which is inclusive of mobile money); this preceded the piloting of branchless banking services that fall. The regulations allowed banks in the Book 4 category (the banks with the highest amount of core capital) to appoint individual agents.[1] The pilots were slightly different as they allowed five financial institutions and three mobile network operators (MNOs) the opportunity to pilot branchless banking services in select provinces. The government did not limit the pilots to just the banks in the Book 4 category, but also allowed banks in the tier below that (Book 3) – including CIMB Niaga – to participate in the pilots.[2]

The pilots concluded in November 2014. Soon after, Bank Indonesia and OJK released further updates to the branchless banking regulations that expanded the number of financial institutions able to provide branchless banking services, and enabled participants in the pilots to build a more concrete branchless banking or digital financial services program.[3] The clarity provided by the new regulations marked a shift from the regulatory environment of the past, which, as discussed, may have put potential service providers in a situation where the rules governing their products could possibly change by the time they were able to launch the service. While just speculation on my part, the current regulatory climate and providers’ experiences with the pilots are likely the reasons that CIMB Niaga and Telkomsel (both participants in the pilot) appear to be more active in their promotion of and development of digital financial services products.

In the next few months the 2015 FII data will be available, and it will show whether or not my 2015 observations were as accurate as what I observed at the outset of the first year of the FII program. My observed increase in this year’s mobile money use, awareness and promotion could have just been a result of coincidence in my interactions and choices for shopping and eating while in Jakarta. Or, it could be that the market truly has begun to change. In either case, it will be great to see what the data unveils this time around.

Watch this space to see what we’ve found.