Indonesia's financial market faces good times now, with card payments with value of transactions reaching 303 bln USD over the country and is predicted to grow by 26% to 2024. The demand for safe and transparent payments is growing as fast as it was never before. The ability to provide customised digital products fast and adapt to a new shifting marketing demand is very important for those who want to stay on the competitive edge.
With bank penetration sitting around 48% in the country, Indonesia continues to improve its digital economy and card penetration. By Global Data survey research, Indonesia stays top7 when speaking about prepaid cards penetration. The prepaid cards market has reached 19bln USD in 2021 and is expected to experience a sharp rise towards 2024, almost doubling the number. The popularity of such cards lie in the digitally active young population and the development of e-commerce, thanks to the internet penetration rapid increase within few years.
Apart from that, the Indonesian market has seen a large increase in local national GPN cards, which number reached over 47m in 2020, which also almost reached the number of transactions of international schemes long present on the market. While still being relatively low in numbers, Visa, Mastercard and GPN are the most popular schemes in the country, which should be considered by issuers as must have in their cards portfolio.
Cards are taking up the market in Indonesia as digital payment instruments, driving cheques out and slowly replacing cash, which is still the dominant means of payment in the country. In 2021 alone, the volume of consumer and commercial usage of cards has reached 1.1 bln operations with 51bln USD volume, which is expected to increase by 22% in 3 years. While consumers' mindset is evolving towards flexible digital payments, the market is still fairly easy to take over with the right targeted supply of services. The issuer banks can secure the market, backing its proposition by the right scalable card management technology to ensure the provisioning of modern customer-centric banking experience to its customers.
With the internet penetration is increasing as well as the share of the young generation getting ready for digital payments, most bank issuers still rely on the legacy systems, which do not cater for the modern demands expected by population such as customisable cards, instant issue capabilities, availability of CNP operations, BNPL features, dynamic CVV, gamification or peer to peer lending options, cutting of the issuer from potential end-users. The banks reluctantly think of a change, as replacement of the legacy platform without smooth integration with other modern services require high effort, costs of implementation and configuration and it could become a real challenge to replace such a system for banks without disruption of activities and suffering downtimes, which usually result in missing out on increasing the cardholders portofolio.
Moving away from legacy platforms may seem challenging, due to uncertainty or possible migration obstacles related to insufficiency of functionality of solution, however making this step bears instant benefits to the banks, allowing to tackle latest advanced technologies and solutions developed to help banks achieve competitive edge.
With the fast-changing environment and emergence of disruptive trends that dramatically change payments, the issuer should refer to the following criteria that would allow them to stay competitive and keep up with Indonesia trends:
Indonesia's cards market is slowly evolving, given the introduction of national payment cards, as well as improvement in cards market share relative to other payment instruments. The customer-centric services and right technological back-up are essential for the bank that wants to be on the tip of the spear. Card Management solutions should help customers to enroll, instantly receive any card and experience digital at its best. The financial trends are developing towards instant payments, virtual and contactless customised cards, buy now pay later and instant lending. To be ready, banks need to have the right technological support to leverage on.
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