Retail Payment Systems
In the OIC Member Countries
57
each of these services could be enabled with or without an attached savings account, so the
demand for these services does not necessarily translate into additional savings accounts.
However, all else being equal, the overwhelming desire is for inclusion in the formal financial
sector, not least because of a crucial factor – trust – which appears to reside most strongly with
the banks, and, in particular, the large commercial and state banks.
Bill payments are overwhelmingly via interest, most particularly for the un- and under-
banked, and should be seen as a potential point of market entry. Mobile money transfers tend
to make more sense to those who have already had some experience with mobile services or
who have a specific need to address. Remittances has a natural constituency among migrant
workers, and while this group is large, it also tends to be geographically specific in Indonesia.
Despite the expressed desires for formal financial participation, informal financial institutions
service a greater proportion of the market than do commercial banks; one-third of Indonesians
do not save at all, with less than half saving at banks. A part of the reason is access. In many
cases financial services are simply not convenient enough to bring the excluded or
underbanked into the formal financial system. To be realistically able to enjoy a savings
account many within the micro-finance segments need more immediate access to their funds.
The more serious impediments to access arise from high monthly fees and high minimum
account balances. Most banks intentionally structure their interest payments on deposits and
monthly fees in a way that discourages small deposits. Banks do this because small accounts
are a costly, administrative nuisance, and because unilaterally closing a non-zero dormant
account entails (contingent) financial liabilities. In other words, new business models will need
to be adopted if financial access is to be successfully extended and this means that the banks
and other providers will need to adapt their pricing and their product portfolios as well as
their mode of delivery if these initiatives are to be successful.
Summary
Because of the size of its economy and population, Indonesia’s payments systems experience
has been extensive and diversified. Despite its low per capita income, the economic growth
rate and optimistic economic prospects mean that Indonesia has opportunities to adopt for
advanced retail payment systems. The conditions of very high mobile telephone ownership
and very low bank account access, transitional though it may be, provides mobile payment
systems operators especially advantageous conditions for market experimentation. With
active government support, we can expect this to become a dominant form of retail payment
system in the third decade of the twenty first century.