Future of E-Money in Indonesia

The use of e-money is inevitably going to expand in Indonesia. Traditional Rupiah currency has been useful for more than five decades or so since Bank Indonesia issued its first bank notes in 1952. However, the society nowadays, at some level if not all, has started to worn out its usage in favor of credit card, debit card, and the recently known, e-money.

What is e-Money? e-Money (also known as e-cash, e-currency, digital money, digital cash or digital currency) refers to money balance recorded electronically on a "stored-value" card that is available to its holder and can only be exchanged electronically.

According to the Banks for International Settlement (BIS) definition, e-money includes both prepaid cards (sometimes called electronic purses) and prepaid software products that use computer networks such as the internet (sometimes called digital cash). These products differ from the so-called access products that allow consumers to use electronic means of communication to access otherwise conventional payment services (for example, use of the internet to make a credit card payment or for general "online banking").

How is e-money possible? A stored-value card contains a magnetic strip that records its money balance, which is either predetermined or established by the consumer when the card is purchased from the issuer. The value of each transaction is deducted from the card balance until it reaches zero. Some stored-value cards can be reloaded with money at special terminals, such as ATM, and are reusable.

Although e-money can undoubtedly provides many benefits to its users such as convenience and privacy, increased efficiency of transactions, and possibly provide lower transaction fees than credit card, yet the use of e-money has been relatively low-scale in many countries. Some rare successes in Asia have been Hong Kong’s Octopus Card, Singapore’s EZLink, and Japan’s Edy and Suica Card, which are all using the same contactless feature technology from Sony Corp.'s FeliCa.

Octopus card system originally launched in 1997 as a transit payment system and has grown into a widely used electronic cash system in Hong Kong for payment at convenience stores, supermarkets, fast-food restaurants, on-street parking meters, car parks, and other point-of-sale applications such as service stations and vending machines.

EZLink that was established in 2001 for public transportation system in Singapore (subway train, bus, etc), has since been expanded and gained more acceptances as a convenient e-money solution throughout Singapore’s main island for payment at McDonalds, fast-food centers, supermarkets, and even to buy soft drink from vending machines.

Edy and Suica card were both launched in 2001. While a Suica card may be a must-have item for Tokyo commuters with about 10 million users, Edy actually leads the e-money market in terms of the amount of transactions made, in part because it can be used in a far greater number of retailers.

Is e-money available in Indonesia? The use of e-money in the form of prepaid card in Indonesia has been popular only since recently. Nevertheless, Bank Indonesia has recognized an increasing demand and popularity of e-money products in Indonesia that led to the launch of Bank Indonesia’s initiative on the less cash society in 2006. The initiative set its goal to promote the creation of a secure, efficient, and reliable e-money for the public. These include the security of e-money schemes, the legal framework, monetary policy and seigniorage, inclusion of e-money as part of monetary aggregates, and implications for payment system oversight and bank supervision.

In 2007, Telkomsel has been granted a license from Bank Indonesia to market its e-money products, namely T-Cash, as the first mobile based e-money in Indonesia, yet its acceptance is still rather limited.

Will e-money gain its success story in Indonesia? Following its success stories in the neighboring countries, e-money in Indonesia could potentially achieved its success if can be used both for payment at various convenient stores and as a transit payment system, including toll road payment system.

Providentially, Jakarta now has a well-known rapid transit system, namely TransJakarta, and several toll road corridor to begin the implementation of e-money as a transit and toll road payment system. Without a doubt, this project needs a sky-scraping amount of funds for investment, nonetheless it will provide much more extra benefits for both the users and issuers of e-money than just a stored-value card that usable only for purchases at convenient stores.