08 Dec 22

Indonesia's dynamic in-store payments landscape


With the rise of digital payments and the government's push towards a cashless society, Indonesia is an exciting market to watch. The fourth most populous country in the world has unique challenges and opportunities for players in the payments space within the region.

Indonesia's 274 million population is still a cash-driven society. Paper money is the primary mode of payment, followed by credit cards, bank transfers, and digital wallets. 66% of its people do not own a bank account, and 77% of the population still pays cash at Point-of-Sale (POS) purchases for low-value transactions.

Indonesia is, however, undergoing one of the fastest digital transformations in the world. The government's push for digital payments to reduce reliance on cash and the exponential number of smartphone and internet usage has increased adoption. The pandemic also had a substantial impact in this area, reflected by the addition of 70 million online consumers in Southeast Asia in recent years, led by Indonesia.

Two significant trends are driving Indonesia towards a cashless society. First, smartphone ownership has increased rapidly from 117 million in 2017 to 199 million in 2021, which is about 72% of the entire population. Second is the rise of FinTech in the country, thanks to Indonesia's central bank for establishing Indonesia Payment System Blueprint 2025, an instant payment infrastructure for fintech companies to grow and innovate. As of late 2021, Indonesia is home to 785 fintech companies and ranked 17 for the number of unicorns globally.

The rising payments complexity in Indonesia

Indonesia presents a fascinating in-store payments landscape with immense potential. With a median age of 29.7 population, fintech and software companies are already offering innovative payment solutions to tap into young consumers who are eager to embrace a digital world. For instance, the country has seen a spike in 5G smartphones, even with low coverage, to be future-ready. The top two e-wallets, GoPay, which has more than 38 million active users, and OVO, have captured 20.8 million users monthly. Both companies are backed by the region's prominent ride-hailing super-apps players Gojek and Grab's collaboration with Tokopedia.

However, these digital behavior developments pose a real problem for retail businesses as they face an increasingly complex in-store payment environment. Merchants must be ready to accept various modes of payments ranging from cash and card to mobile wallets and QR codes, in particular, QRIS, the national QR code to facilitate payments in Indonesia. Moreover, accepting payments from different providers will allow merchants to meet customers' expectations for a frictionless payment experience to remain competitive. And this will be exacerbated when the country completes its 5G coverage and more advanced payment methods and payments-linked services will enter the market.

Android is the future of Point-of-Sale

An Android-based smart POS's high performance and flexibility allow businesses to manage payments beyond a proprietary terminal's limitations, such as incremental upgrades and manual software changes. 

The Android environment has the latest technical capability to design and adapt new functionalities, transforming the payment terminal to empower merchants and provide a seamless customer experience. Furthermore, the extended hardware functionalities such as cameras, scanning, and NFC gives the ability to accept alternative payment methods, digital wallets, and QR codes on top of the traditional payment modes. 

For banks and acquirers, Android terminals open the way to an advanced payment ecosystem and access millions of existing apps without building from scratch. Acquirers can also develop their own apps with value-added payment providers designed specifically for merchants, giving them a competitive advantage and improving client retention. And, as apps play a more critical role than the device, one smart terminal can replace multiple devices, reducing ownership costs for both acquirers and merchants.

In the payment world, security is paramount, and for Ingenico, it is in our DNA. Our Android terminals are PCI compliant, meeting the strictest payment security standards. And an extra layer has been added with the launch of the AXIUM platform, designed to provide secure payment alongside the Android environment.

With this advanced level of robustness, flexibility, and security, Ingenico is taking it further by making the Android smart terminals seamless with Payments Platform as a Service (PPaaS). The cloud-based platform connects partners to an integrated ecosystem, enabling them to deliver advanced payment and commerce services. 

PPaaS allows merchants to provide payment solutions with third-party services like loyalty schemes or Buy Now Pay Later at the Point-of-Sale. For acquirers, it will close the gap between in-store and online players by giving their merchants access to omnichannel commerce and payment ecosystem. As for customers, the in-store payments experience will be more than just a transaction but a place of interaction, blurring the lines between in-store and digital payments.

Terminal estate total cost of ownership 

For banks, acquirers, and merchants, having ownership over payment terminals is part of the company's long-term assets. But purchasing and managing the terminal estate is a substantial investment that could impact business operations in the current geopolitical climate and rising prices. 

For the Indonesian market, acquirers and merchants met several challenges regarding terminal management to improve business and operational efficiency. Dealing with multiple service providers at different maturity levels is time-consuming. As the providers use various systems, acquirers receive numerous data sources, making it hard to get a consolidated view of the service rendered. The interaction with service providers is most often done manually, causing delays and adversely impacting customer experience for merchants.

Terminal as a Service removes the complexity of estate management

Terminal as a Service (TaaS) is an end-to-end solution to manage payment terminal estates for banks, acquirers, and merchants. It enables businesses to differentiate, control costs and focus where it matters most, their own customers. 

TaaS's modular offering manages the hardware, software, and services management that can be customized according to a business need and a fixed monthly fee per device.  

Ingenico recently completed the Forrester's The Total Economic Impact of TaaS by Ingenico report, an independent study that has proven the benefits of the service. 

Forrester interviewed four representatives with experience using TaaS by Ingenico. Before using TaaS by Ingenico, the four interviewees noted how their organizations' terminal solutions lacked flexibility and value-added offerings. They struggled to differentiate against competitors in a commoditized market. They required a solution that enabled them to modernize their terminal estate and utilize industry expertise to support their innovation initiatives and improve merchant experience.

After the investment in TaaS by Ingenico, the interviewees' organizations reduced their hardware capital and terminal estate management costs. The organizations were able to focus on improving the merchant experience and develop value-added services. This created new revenue streams and improved merchant loyalty.

The key findings were:

  • The elimination of upfront capital costs
  • Estate management costs were reduced by 30%
  • Vendor management effort is decreased
  • Merchant retention is increased by 10%
  • Increased profit from value-added services
  • The freedom to reassign development resources to other projects
  • Enabled innovation
  • Improved time-to-market

Consolidation is the next frontier

As cash transactions give way to digital payments and digital adoption accelerates, businesses must be ready for a fluid payment landscape. Ingenico is helping our partners navigate through this by providing a seamless network of best-in-class products and solutions. With more than 40 years of history, expertise, and capabilities of a global team, Ingenico is transforming the in-store payment experience as a trusted payment and commerce technology ecosystem enabler.

It is an exciting time to be on the cusp of a payment revolution and shape the new world of payments together with our partners in Indonesia. 

For more information on Ingenico Indonesia products and solutions offerings, please contact Ingenico Indonesia team: [email protected]

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Country Head, Indonesia

Ingenico APAC

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