Cash on Delivery Still Wins Out in Indonesia

But there are a number of digital payment services on offer

Author: Rahul Chadha

April 27, 2017

Indonesia is still a country where cash is more widespread and useful to residents than any other form of payment. That explains why consumers still rely on cash even for digital purchases.

According to data from Southeast Asia-based ecommerce logistics provider aCommerce, cash on delivery (COD) was still the payment method used for nearly two-thirds (65.3%) of digital purchases in Indonesia in February 2017. Credit cards were used to complete about one-fifth (20.7%) of online purchases, while ATM or bank transfers were used for 13.9%.

Online shoppers in Indonesia don’t seem to have achieved a level of familiarity and comfort with alternatives to cash just yet. But that may soon change.

Alibaba affiliate Ant Financial has made some aggressive moves into the market. Earlier in April the company announced a partnership to launch a payments service on BlackBerry Messenger (BBM), a messaging platform that has largely been forgotten about in Western markets but remains a player in Indonesia.

A poll of mobile internet users from research firm JakPat found that 83.1% still used BBM in January 2017.

In addition, earlier this month Ant Financial rebranded helloPay, the digital payment service offered by ecommerce platform Lazada in Indonesia, rechristening it as Alipay Indonesia. While the service does not yet offer all of the same functions as Alipay—Ant Financial’s digital payment platform that is popular in China—the move shows Ant Financial is laying the groundwork to take advantage of an expected shift in consumer behavior regarding payments.

It’s likely that a large portion of consumers in Indonesia will skip the adoption of payment cards—both credit and debit—in favor of digital payment services that can be accessed on smartphones. In fact, companies like ride-hailing service Go-Jek are betting on this by expanding their services to include things like digital payments.

If such a shift happens, it will be helped along by the continued adoption of smartphones in the country. eMarketer projects that smartphone users in Indonesia will number 67.1 million this year, a figure that will grow to 92.1 million by 2020.