The financial technology (fintech) sector in Indonesia is on the rise. Two years ago eWallets overtook ATM and debit cards as preferred payment methods in Indonesia and the country’s digital economy is likely to hit over $100 billion by 2025

It’s not only the COVID-19 pandemic that is accelerating the popularity of these digital payment platforms as contactless payments are encouraged, but the country’s rapid digitalisation is opening up previously untapped potential avenues. These factors have set up a fintech battleground with giants like Gojek and Grab fighting for their market share in the pursuit of establishing themselves as the next big thing in the burgeoning fintech scene.

We explore some of the emerging trends in Indonesia’s promising payments app battleground.

If Indonesia’s fintech industry is of interest, check out our article about the top 5 non-banking e-wallets in the market.

The tip of the iceberg

Malaysia may have a lead in the highest use of eWallets and payment apps in Southeast Asia, but Indonesia has great potential to catch up due to the sheer size of its youthful population and encouraging signs of digital growth. Currently, only 48.85% of Indonesians access banking according to the Rapyd report 2020, and in 2019, only slightly more than half of the citizens had access to the internet. But, if these numbers rise as quickly as expected, they will contribute to an enormous growth spurt in eCommerce and fintech in Indonesia. Credit cards might still be used frequently, but eWallets are certainly rising in popularity among everyday customers. 

banknote and Passport on white panel

J.P. Morgan reported that Indonesia’s mobile commerce market should expand at a compound annual growth rate (CAGR) of around 45.2% by 2021, and digital payment methods can also count on the support of the Government. In 2019, the Jakarta chapter of Bank Indonesia (BI) and the Jakarta-owned Bank DKI launched the Digital Island program to make cashless payment available to locals and tourists, through the use of QR Code Indonesian Standard (QRIS) which they provided to SMEs. 

The country is also considering introducing flat rates for digital wallet payments, while other new regulations will make it more difficult for merchants without a physical location in the country to penetrate the market. 

Grab’s ambitious crossover

Grab, the largest mobile technology company in Southeast Asia wants to overtake its rival Gojek. It is planning to merge OVO, a company in which it owns shares, with DANA, a digital wallet provider, to offer a better and more trusted service to the Indonesian market. Grab is worth about $14 billion USD and Gojek is worth around $10 billion USD, so this strategy will put the Singaporean-based firm in a commanding position in the Grab-Gojek battle. The merging of the digital payments companies OVO and DANA could be Indonesia’s most ambitious crossover event to date.

According to New York-based market intelligence firm CB Insights, OVO has a valuation of $2.9 billion. DANA, averaging about 1.5 million transactions daily, is supported by funding from the Ant Financial Services Group and offers cashless and cardless payments for everyday needs. 

The OVO-DANA merger could streamline local payment methods in the currently fragmented landscape of Indonesia. It could offer a chance to conquer a larger market share before expanding its services to become a super app. The resulting ease of service could be of extra value to customers and could help Grab in their battle with rival Gojek. 

Gojek’s big plans for GoPay

With a strong presence in the market since 2010, Gojek is the Goliath of Indonesia’s digital payment economy. In the last ten years, it has undergone a massive transformation from being a simple ride-hailing service to becoming the largest super app in the country. Their one-stop platform with more than 20 services, one of which is GoPay—their digital wallet, has been downloaded by 170 million users across Southeast Asia.

In March of 2020, Gojek raised $1,2 billion USD to secure funds to take on Grab. Recently Facebook and Paypal invested in the app with an undisclosed sum. While the effect of this capital on GoPay is unclear, one thing is certain that Gojek will undoubtedly try to strengthen its position to defend and expand its market share against the OVO-DANA merger and other relatively smaller competitors. 

Indonesia’s digital divide is a big issue for the market. We look into the topic here.

Various factors are contributing to the rise of eCommerce in Southeast Asia, and Indonesia in particular. The COVID-19 crisis, combined with the huge, largely untapped potential in the archipelago, has given rise to this battle of the digital payment services. Gojek has proven its value in the country and will try to secure its share using its recent funding to explore the market further. But the competition is fierce, and the merging of OVO and DANA might threaten its position. Their combined forces can offer an all in one solution to suit the local market. But in the end, the fintech in Indonesia war will be decided by the customers, who will act on their preference and choose the solutions that offer the most convenient method of payment.