2019 J.P. Morgan Global Payment Trends
E-commerce Payments Trends: Indonesia
Indonesia e-commerce insights
Indonesia’s e-commerce market trends: Major growth boosted by economic gains
Indonesia’s business to consumer e-commerce market is worth $13.6 billion.14 While accounting for just 0.6 percent of its overall retail market,15 Indonesia’s online shopping sector has expanded at a prodigious rate, growing by over a third in both 2016 and 2017.16 And with this growth set to continue, the world’s largest archipelago also has the highest e-commerce growth prediction out of all the countries surveyed in our report series.
Indonesia’s online shopping industry is forecast to expand at an impressive compound annual growth rate of 34.6 percent to 2021,17 driven by increasing internet penetration, which currently sits at a lowly 32.3 percent,18 and an ongoing trend of steady gross domestic product growth.19 The scale of this development is clearly also a result of the industry’s immaturity. At present, annual per capita spend is low, standing at $344 a year.20
When Indonesians do shop online, they tend to spend on travel. This is far and away Indonesia’s most popular e-commerce market segment, taking a 58.9 percent share of all online sales.21 Local sites Tiket and Traveloka are the major travel platforms.22 Clothing and apparel is Indonesia’s second most popular online shopping category, taking a 14.6 percent slice of the domestic e-commerce market.23
Local online marketplaces, which allow both brands and individuals to sell products, dominate as the sites generating the most traffic: Indonesia’s top three e-commerce sites by visitor numbers are sales platforms Lazada, Tokopedia and Bukalapak.24 This could change, however, as international merchants begin to target this relatively untapped opportunity. Online shopping giants Amazon, Alibaba and JD.com all have plans to expand their presence in Indonesia.25
Young consumers key to boosting Indonesia’s e-commerce growth
Cross-border shopping is the preserve of a minority of online shoppers in Indonesia – just seven percent have purchased from abroad – but cross-border sales account for 20 percent of the overall e-commerce market, suggesting consumers are seeking higher-value items.26,27 The most popular international e-commerce destination is China, followed by Singapore and Japan.28
E-commerce market growth in Indondesia will also be driven by a youthful population; the average age is just 30.5 years.29 Indeed, half of all Indonesians are aged under 30, and there is a rising middle class.30 The official language is Bahasa Indonesia,31 but there are some 580 languages spoken.32 Highly spoken languages include Javanese, English and Dutch.33 Providing websites that offer language capabilities in the most-spoken languages should help drive e-commerce sales in Indonesia.
Unique delivery challenge for Indonesia’s e-commerce market
With an estimated 17,508 islands, 6,000 of which are inhabited,34 delivery represents a significant challenge in Indonesia. Parcel delivery services are required to traverse mountainous regions, urban hubs and significant bodies of water. In some rural areas, many streets lack official names, and in urban areas there is often duplication of street names.35 The state-owned national postal service, PT Pos Indonesia, is also battling a lack of modern infrastructure and low consumer postal charges, which its president has claimed are below the cost of the service.36
As e-commerce sales increase, the Indonesian government is turning its attentions to the tax affairs of online shopping platforms in a bid to recover tax from undeclared sales revenue. As of April 2019, all online marketplace operators must report each seller’s turnover to the Indonesian tax authority.37 The new regulations also stipulate e-commerce merchants that make more than $339,943 in annual turnover must charge VAT to customers and pass this fee on to the government.38
Mobile commerce leads Indonesia’s e-commerce growth
Indonesia is a country of smartphone devotees. While penetration is only at 40 percent,39 those that do own mobile devices use them constantly. Shopping on the move is already Indonesia’s primary e-commerce mode, accounting for 52 percent of all completed transactions.40
Indonesia is one of the fastest-growing mobile commerce markets in the world, now worth $7.1 billion,41 a figure that is projected to rise rapidly as smartphone penetration increases. Indonesia’s mobile commerce market is expected to grow at a compound annual growth rate of 45.2 percent to 2021,42 when sales via this channel will be worth a projected $31.5 billion.43
Apps surge ahead in Indonesia’s e-commerce market trends
Apps are the primary mobile sales channel, taking a 74.8 percent share of the mobile commerce market or $5.3 billion in sales.44,45 YouTube, Facebook and WhatsApp are the most popular social media channels, and, as in other countries, e-commerce merchants in Indonesia are using the power of influencer marketing.46 Social media represents a highly effective way to reach consumers: capital city Jakarta, for instance, has the highest number of active Twitter users in the world.47
Selling via social media sites such as Pinterest and Instagram’s Stories function is a key trend.48 As a result of micro-enterprises selling via social media, social commerce is now estimated to account for 40 percent of all e-commerce sales in Indonesia.49 While these more informal sales platforms, which are dominated by micro-enterprises, may present issues for Indonesia’s tax authorities, they also represent an exciting opportunity for larger merchants to engage with young, technologically advanced Indonesian online shoppers.
Indonesia e-commerce payments trends: Cards win out, as digital wallets delayed
Cards are the dominant payment method in Indonesia when shopping online, taking a 34 percent share of the market.50 This is in spite of low card penetration, which sits at just 0.59 debit cards per capita and 0.07 credit cards per capita.51 Visa® and Mastercard® are both well-recognized and utilized brands,52 and cards will continue to hold the pre-eminent position in the marketplace, growing at a compound annual growth rate of 39 percent to 2021.53
Bank penetration in Indonesia is 48 percent,54 leaving significant room for growth in the debit card market. Despite this low penetration, bank transfers are the second most-used e-commerce payment method in Indonesia, accounting for just over a quarter (26 percent) of sales.55 This method is expected to decline slightly to take a 24 percent share of the market by 2021, by which point it will be overtaken by digital wallets.56
Currently the third most-used e-commerce payment method, digital wallets are rapidly increasing in popularity.57 Aided by rising smartphone penetration, digital wallets are used for one in five of all online shopping in Indonesia.58 Popular brands include PayPal® and domestic brand Go-Pay, the digital wallet arm of a major Indonesian e-commerce success story, the e-commerce app Go-Jek.59,60
Regulations hinder digital wallets business
Long waiting times have been reported when attempting to obtain the domestic banking license needed to operate a digital wallet business within Indonesia.61 The required regulatory approval is called an ‘electronic-money’ license, which is issued by the Indonesian central bank, Bank Indonesia.62
In addition, all digital wallet providers with more than 300,000 active users (or who plan to have more than this number of users) must seek further approval before starting further payment activities such as issuing and acquiring or creating new products.63 Despite these issues, digital wallets are the fastest-climbing payment method, growing at a compound annual growth rate of 47 percent to 2021, by which point they will be used in 29 percent of all e-commerce transactions.64
Cash still makes up 14 percent of the Indonesian e-commerce payments space,65 likely due to the fact that more than half the population remains unbanked.66 Cash on delivery is a widespread payment option,67 although this method is predicted to decline to take a six percent share of online payments by 2021.68
Fraud could be mitigated as new payments emerge in Indonesia
Significant levels of online fraud have been reported over the past three years in Indonesia,69 but there exists a paucity of data. As payment methods with strong digital security measures, such as cards and digital wallets, grow in use, incidences of fraud should fall.
Key takeaways
- Indonesia is one of the fastest-growing economies in the world, but its rapid development has largely been based on the export of goods such as textiles, automobiles and electrical appliances. The country’s digital economy is now looking to catch up, yet the country presents unique challenges for international brands targeting one of the fastest-growing economies in the world.
- In addition to being a nation where approximately 580 languages are spoken, Indonesia is made up of about 6,000 inhabited islands – two factors that can make digital sales and product fulfillment challenging. Cross-border shopping is the preserve of a minority of online shoppers in Indonesia where local online platforms currently draw the most consumer traffic, the most popular of these being Lazada, Tokopedia and Bukalapak.
- Despite relatively low card penetration, cards are the preferred method of payment when Indonesian consumers shop online.
E-commerce Payments Trends: New Zealand
New Zealand’s e-commerce market is relatively small but strong growth and a high per capita spend are creating exciting opportunities for online merchants, as demand in rural areas catches up with the cities.
Read our full report for the e-commerce payment trends that merchants need to know.
E-commerce Payments Trends: China
China’s e-commerce market is worth a trillion-dollars and Chinese consumers now expect excellent, world-leading apps and seamless digital wallet payment options.
China also offers ongoing e-commerce growth potential via the large section of its population that is yet to embrace online shopping. Read our full report for the payment trends merchants need to know.
To learn more about payment trends in the world’s leading e-commerce markets, contact your J.P. Morgan representative or call us on:
US: 1-800-708-3739
UK: 0845-399-1130
Europe: +353-1-726-2909
1 Economic Research, J.P. Morgan Chase Bank, March 2019.
2 Economic Research, J.P. Morgan Chase Bank, March 2019.
3 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ecommerce IQ, Google and TEMASEK report and EDC analysis.
4 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.
5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Fact Book, 2017.
6 World Bank Open Data. ‘Indonesia.’ Accessed March 2019.
7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ecommerceIQ.
8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis.
9 J.P. Morgan 2019 Payments Trends – Global Insights, Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Tech In Asia/Jakpat report: ‘Indonesia Ecommerce Habi’t 2017.
10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank.
11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via McKinsey report on ‘The Digital Archipelago’, 2017.
12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.
13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via BIS.
14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ecommerceIQ.
15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Google - TEMASEK Report.
16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ecommerceIQ.
17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ecommerce IQ, Google and TEMASEK report and EDC analysis.
18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.
19 Wikipedia.org, March 2019. ‘Economy of Indonesia.’ Accessed March 2019.
20 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis, 2017.
21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista & EDC analysis.
22 Export.gov, February 2019. ‘Indonesia – eCommerce.’ Accessed March 2019.
23 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista & EDC analysis.
24 Aseanup.com, June 2018. ‘Top 10 e-commerce sites in Indonesia 2018.’ Accessed March 2019.
25 InvestorPlace.com, February 2019. ‘JD.com Stock Set for a Long-Term Boost From Focus on Indonesia.’ Accessed March 2019.
26 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ecommerceIQ: ‘What are shoppers looking for across borders in SouthEast Asia’ & EDC Analysis, 2017.
27 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Acapture Cross-Border report, 2017.
28 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eShopworld, 2017.
29 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Fact Book, 2017.
30 Export.gov, February 2019. ‘Indonesia – eCommerce.’ Accessed March 2019.
31 EmbassyofIndonesia.org, 2019. ‘Facts & Figures.’ Accessed March 2019.
32 EmbassyofIndonesia.org, 2019. ‘Facts & Figures.’ Accessed March 2019.
33 EmbassyofIndonesia.org, 2019. ‘Facts & Figures.’ Accessed March 2019.
34 EmbassyofIndonesia.org, 2019. ‘Facts & Figures.’ Accessed March 2019.
35 Economist.com, January 2019. ‘Indonesia binges on e-commerce.’ Accessed March 2019.
36 Bloomberg.com, November 2018. ‘Think Your Postal Service Has Problems? Try Delivering to 18,000 Far-Flung Islands.’ Accessed March 2019.
37 Reuters.com, January 2019. ‘Indonesia cracks down on e-commerce to raise tax collection.’ Accessed March 2019.
38 Reuters.com, January 2019. ‘Indonesia cracks down on e-commerce to raise tax collection.’ Accessed March 2019.
39 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via McKinsey report on ‘The Digital Archipelago’, 2017.
40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Tech In Asia/Jakpat report: ‘Indonesia Ecommerce Habits’, 2017.
41 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis.
42 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis.
43 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis.
44 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Tech In Asia/Jakpat report: ‘Indonesia Ecommerce Habits’ 2017.
45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis.
46 Aseanup.com, June 2018. ‘Top 10 e-commerce sites in Indonesia 2018.’ Accessed March 2019.
47 Export.gov, February 2019. ‘Indonesia – eCommerce.’ Accessed March 2019.
48 Bloomberg.com, November 2018. ‘Think Your Postal Service Has Problems? Try Delivering to 18,000 Far-Flung Islands.’ Accessed March 2019.
49 TheAseanPost.com, November 2018. ‘The rise of e-commerce in Indonesia.’ Accessed March 2019.
50 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
51 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via BIS.
52 TransferWise.com, July 2018. ‘ATMs in Indonesia: Credit cards and fees.’ Accessed March 2019.
53 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
54 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.
55 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
56 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
57 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
58 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
59 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
60 FintechNews.sg, January 2018. ‘It’s Becoming Increasingly Difficult For Newcomers To Enter The Mobile Wallet Space In Indonesia.’ Accessed March 2019.
61 TechinAsia.com, October 2017. ‘Indonesia’s ‘ewallet freeze’ slows down partnership between Uber and Tokopedia.’ Accessed March 2019.
62 FintechNews.sg, January 2018. ‘It’s Becoming Increasingly Difficult For Newcomers To Enter The Mobile Wallet Space In Indonesia.’ Accessed March 2019.
63 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via White & Case, 2018.
64 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
65 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
66 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.
67 eMarketer.com, April 2017. ‘Cash on Delivery Still Wins Out Among Digital Shoppers in Indonesia.’ Accessed March 2019.
68 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.
69 Indonesia-Investments.com, May 2016. ‘Online Scams in Indonesia: 26% of Consumers Become Victim of Fraud.’ Accessed March 2019.
About J.P. Morgan
J.P. Morgan offers a full suite of payments services to enable a seamless connection across the payments continuum for clients. We bring our consultative expertise, data-driven insights, and local service around the globe to provide a more unified view of payables, receivables and cash management. Merchant Services is the payment acceptance and merchant acquiring business of JPMorgan Chase & Co. (NYSE: JPM) – a global financial services firm with assets of $2.6 trillion and operations worldwide.i According to The Nilson Report, it is also the top merchant acquirer of e-commerce transactions in Europe.ii
i JPMorgan Chase & Co. Q4 2018 Earnings Report 2018.
ii The Nilson Report, #1132 May 2018.
This document is based on projected figures and is subject to change at any time. Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.
Information contained in this document has been prepared by third parties or obtained from sources which are believed to be reliable; but neither Chase Paymentech Europe Limited nor any of its affiliates warrant the completeness or accuracy of the information contained herein. Chase Paymentech Europe Limited and any of its affiliates shall have no liability to the user or to third parties, for the quality, accuracy, timeliness, or for any special, indirect, incidental or consequential damages which may be experienced because of the use of or reliance on the data or statements made available herein. Third party trademarks, brand names, products and services are only referential and Chase Paymentech Europe Limited and its affiliates disclaims any sponsorship, affiliation or endorsement of or by any such third party.
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Directors: Brian Gaynor, Carin Bryans, Dara Quinn, Steven Beasty (US), Eilish Finan
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Leadership
8 Questions to Consider Before Investing in Tech
To make the smartest investments in digital technology, do your homework, know what problem you’re trying to solve and think (very) long term.
Wherever you are on your digital journey, these are exciting times. You might say it’s a buyer’s market for innovation. The sheer availability of fintech solutions is dazzling. But the torrent of digital choices also presents a problem—temptation.
We’re all wowed by shiny tech demos and slick sales pitches. Implementing a tech solution, however, is never easy. You’ve got to keep your eyes on what you’re trying to do, not what a vendor wants you to do.
Before you make a decision, find your focus. To put it a little more colloquially, do your homework. Here are eight things I always consider:
The goal is not to get a tool. The goal of any technology is to solve a specific business challenge. Examine your challenge from every angle to create a full picture of the issues at hand.
There are umpteen different ways to measure the outcomes of your project. Wherever you land, your measures must be quantifiable. Revenue should go up by X. Customer satisfaction should improve by Y. Processing times should decrease by Z. At the firm, we run ROI scenarios for our clients to ensure their strategies are sound and their targets are attainable.
Fintech entry costs assume that your data is completely clean. That means you need a data model that fits the business domain you’re working in and the company’s broader data strategy. But here’s the thing: No company’s data is completely clean. To get the most out of your fintech products, you’ll need to put in the work to ensure the quality and integrity of the data you’re using.
One of the biggest mistakes that companies make is trying to force-fit a piece of technology into their existing process. To make better use of the technology, be prepared to redesign your process. This is the art of change management. You may need different talent, different thinking—or you might need different technology.
Once upon a time, you’d buy a piece of software for a big upfront price and then pay smaller maintenance fees in perpetuity. No longer. Now a lot of fintechs are subscription-based, and you pay an annual fee. In the short term, that can be a good thing, since you’re not committing so much upfront. However, the strategy is designed to get you locked in. Think carefully about the multiyear commitment before you sign a contract. Will you become dependent on your vendor for services and integration every time you want a change? In the long run, that scenario could cost you more.
Understand how every solution you buy fits into the ecosystem as a whole, or you could be left stitching together all the individual pieces. You might find a great solution in the card space. But what happens when you want to go international? When helping our clients, we draw on our numerous partnerships with fintechs to ensure clients find solutions that grow with them
Bespoke can be a slippery slope—and an expensive one. If you’re not careful, you can customize so much that the product is unrecognizable to the vendor. Every time a vendor makes a change, you’ll end up doing a lot more work, and the price will go up.
Avoiding pitfalls is easier when you partner with someone who has walked the walk before. JPMorgan Chase is a huge investor in technology, an innovator in technology and a big consumer of technology. Everything you’re trying to do—we’ve done it, and on a very large scale. Our clients depend on us for that experience. You don’t have to do this alone. Be sure you’re seeking sage advice before you make a big investment in the future of your business.
Yes, finding these answers is time-consuming, but it is time well spent. The decision to invest in digital tech requires that you revisit and thoroughly understand your organization. Thoughtful research ensures you don’t find yourself stuck with a costly solution that can’t solve your challenges or grow with you. You may find that the problem you’d set out to solve isn’t the most pressing. Or you might discover a need to alter your organizational strategy. Few processes will prove as valuable to you and your leadership team as you take your business into the future.
