When I started living in Shanghai 2 years ago I was surprised with the scale of how cashless transactions have become such an integral part of people’s daily lives. It goes beyond simple mall shopping or dinner at restaurants: people now put up QR code signs of WeChat Pay and Alipay for even for traditional grocery shopping, biking around or even a street music performance! How crazy is that?
Looking back at those days, I can’t help but comparing it at my own home country. Recently, cashless society movement started gaining attention with Go-Pay (owned by Gojek) and OVO competing for Indonesian market share. Various campaigns have been done to attract attention: accumulative points, shopping discounts, and many more. However, are Indonesians ready for this transformation?
-Strong Cash-
According to The G4S World Cash Report, cash circulation from 2012 to 2016 in Indonesia showed significant growth of 53.1%, at IDR 2,353 trillion. This is understandable: cash system has people’s trust, doesn’t depend on battery life, and requires no technology knowledge and costly smartphones (a “luxury” that so many people in Indonesia don’t own).
-Infrastructure is (Still) Not Ready-
There are many infrastructural problems which come along the efforts to “familiarize” cashless system in Indonesia. Smartphone penetration in Indonesia last year was 47% compared to 79% in China. The cases about some Grab (OVO’s partner) drivers rejecting mobile payments, top-up problems or people stuck in parking basement because OVO has compatibility problems with ticket machine don’t help the case either. This leads to lower trust towards cashless system despite its bright promises.
-Conclusion-
Is the Indonesia ready to become a cashless society? The answer would be no. Not yet, but it’s there. Simply rushing things will not work. Its current hope is perhaps to grow current online shopping market, which is in a stable track already. Government also has an important role to pave the way, be it in terms of supportive regulations, socializing its people, or improving the technical infrastructure. Me? I’ll settle with bringing cash around, for the time being.
Source:
China Can’t Afford a Cashless Society
https://www.scmp.com/business/money/article/2155223/china-goes-increasingly-cashless-pboc-says-cash-payment-still-alive
https://keuangan.kontan.co.id/news/g4s-world-cash-report-uang-tunai-masih-dominasi-transaksi-keuangan-di-indonesia
Thanks for your post! In your blog you state that society is becoming more and more cashless in regards to transactions. Do you personally believe cash will be eliminated in the future?
There are still many economies that mainly rely on cash or the lack of accepted credit card providers (the Netherlands being a good example with VISA not being accepted at many stores). Interestingly, the volume of notes and coins in the world is actually on the rise.
I do agree with your statement that currently, Indonesia, and many other countries are not ready yet for a purely cashless society. I personally think they might never be, just because cash for many represents a physical ownership and security that a bank doesn’t provide for everyone.
Thank you Theo for sharing this interesting topic! Indeed, it is a big question of whether Indonesia will still continue to pay everything by cash. You might even question this further to will they also skip the “area of the credit card” as China did and directly adopt online payment methods? There are several reasons why this might happen in Indonesia as well. First of all, Indonesia is comparably late in the mass adaption of credit cards. Due to the given economic reasons, a lot of people in Indonesia also do not have the opportunity to apply for a credit card. Furthermore, online payment companies such as WeChat in China are able to provide payment on the cheap, partly by allowing smaller vendors to make use of a simple printout of a QR code instead of an expensive card reader. As you mentioned money issues are usually strongly related to trust. If companies such as Gojek payment are not able to provide a certain trust level, the overall cashless idea will not work.