Indonesia's Financial Companies Team up to Challenge Go-jek and OvoIndonesia has been going aggressive on its cashless drive

Indonesia's state-owned banks are all set to challenge the two key dominant players in the digital payments market, Go-Jek and Ovo.

In the rapidly growing e-payments industry, the top five banks Telekomunikasi Indonesia, Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia, and Bank Tabungan Negara have decided to merge their different mobile payment services into one platform called LinkAja.

Creating a Third Bloc
The new banking-telecom alliance aims to create a third bloc in a market that nearly quadrupled in size in 2018, reaching $3.34 billion in transaction value. The government of Indonesia has been boosting the digital payments industry so that people transact more cashless payments.

The move by the state-owned companies is likely to support by the Indonesian government. LinkAja is scheduled to start in March 2019, and it will allow users to make cashless payments through QR codes. In addition, the new platform is expected to allow users to pay bills, such as utilities, and will not require a bank account, with options to top-up balances at places like convenience stores and ATMs.

After launching electronic money and digital wallets, state-owned banks will be merged into LinkAja. Later there will be no T-Bank or QR Code owned by BRI, e-cash and e-money belonging to Bank Mandiri or Yap! and Tap Cash from BNI, only LinkAja will be there in the form of a server and card-based electronic money or QR Code.

Cashless Drive

Indonesia has been going aggressive on its cashless drive. According to the Morgan Stanley data, Indonesia is regarded as one of Asia's most attractive markets for digital payments, with roughly 91 percent of its 264 million strong population owning a mobile phone, but a heavier than average reliance on cash.

"The opening-up of the payments market creates a potentially existential challenge for banks — and huge opportunities for new non-bank entrants," Morgan Stanley said in a report published in October last year. "It is not just about the money that can be made from processing payments," the report argued. "It is also about payments as a gateway to deposits and other financial products, transferring value away from banks and toward non-banks."

Morgan Stanley expects the big winners in Southeast Asia to be independent payment services such as Indonesia's Go-Pay, Singapore's GrabPay and Thailand's telco-linked TruePay, followed by banks. Yet, the biggest winner is likely to be consumers such as you and me, who no longer have to rely on cash, credit cards or cheque books.