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Cheaper and simpler payments drive economic inclusion in Indonesia

Published on April 5, 2023


Although it is the largest economy in Southeast Asia, Indonesia faces numerous challenges in the payments sector. Despite the country’s rapid digitalization and growing e-commerce industry, many locals still rely on cash for transactions, leading to widespread systemic issues related to financial inclusion and security. 

Additionally, the lack of a standardized payment infrastructure and limited access to banking services in remote and rural areas have also posed fundamental challenges to the development of the nation’s payments ecosystem.

With us today to discuss are two expert stakeholders in the game. Tessa Wijaya is the co-founder and COO of Xendit. One of Indonesia’s latest unicorns and sometimes referred to as the ‘Stripe of Southeast Asia,’ Xendit is a fintech company that provides payment solutions for businesses and individuals in the region. Gita Prihanto is the COO at Flip, a fintech company that lets users make payments, transfer money, pay bills, and purchase goods and services easily via mobile.

Making it cheaper for consumers

Until recently, interbank transfers in Indonesia had been painful because of their relatively high fees. It cost a significant portion of the day’s general budget (many Indonesians live on just a few dollars per day) to send money from one bank to another inside the country. Rp6,500 equates to roughly US$0.50. While this may not sound like much, it represents a significant expense to many locals, especially for those who need to make frequent transfers. 

Small business owners or freelance workers who rely on transfers to send or receive payments may struggle with these fees. The cost of interbank transfers can be a particular burden for low-income individuals who need to send money to family members in other parts of the country. As a result, many Indonesians may opt for informal channels, such as cash couriers, which can be risky and unreliable.

Flip is a fintech company based in Indonesia that provides a mobile app for peer-to-peer money transfers and other financial services. The company was founded in 2015 by three university students who aimed to address the high cost of interbank transfers. Today, the company has evolved to offer a variety of fintech services, including bill payments, prepaid phone credit top-ups, e-wallet top-ups, remittances, and more. The startup strives to provide fair and accessible financial services to its users, explained Gita, with a focus on convenience and affordability.

Making it simpler for SMEs

Xendit started much like Flip, a fintech company that provided solutions based on money transfers, explained Tessa. She and her co-founder Moses soon realized that payments in Indonesia were so fragmented that, at the time, it would have taken too much work to make the app easy to use and frictionless for customers. 

Credit cards have never been (and likely will never be) a driving force of payments in Indonesia. Back in 2015, there was limited infrastructure for electronic and digital payments in general. The cash-based economy still reigned supreme and there were complex regulations due to many different rules and requirements for different types of payments.

“Xendit received many requests from its startup peers to make a solution for bank transfers to happen in real-time. For a business to come online, it would need to integrate into every bank, a process that would take three to six months. How could a business begin operating online if it could not accept payments? This process was not only lengthy but also came with complex pricing, set-up fees, integration fees, and penalties for service termination,” said Tessa.

Very few of Indonesia’s more than 64 million MSMEs wanted to go through all this trouble to sell goods and services online. Xendit sought to remove this barrier to entry. It offered free integration, public APIs, and access at any time. It provided on-demand customer support so businesses would not have to go through the same frustration that existed with the old paradigm of bank integration. Xendit even did away with service termination fees, explained Tessa. All her team asked for in return from the customer was the truth about how the platform could be better going forward.

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