Benefits and Harms from the Entry of Chinese Fintech Payment Giants

Penulis: Desy Setyowati

Editor: Safrezi Fitra

Selasa 27/11/2018, 19.23 WIB

The presence of two fintech giants that have dominated the Chinese market is believed to be able to accelerate fintech adoption in Indonesia.

Telaah - Fintech Pembayaran
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WeChat and Alipay, two Chinese fintech firms providing payment services, have entered the Indonesian market. They are working with state-owned bank, PT Bank Negara Indonesia (BNI), whose target can be realised at the end of this month. The presence of two fintech giants that have dominated the Chinese market is believed to be able to accelerate fintech adoption in Indonesia.

Seeing their popularity in China, WeChat Pay and Alipay are expected to accelerate equitable adoption of fintech from 9 percent today to around 69 percent in 2021. Referring to Ernst & Young (EY) data, the world’s population adopting fintech reached an average of 33 percent in July 2017.

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China is a country with the highest fintech adoption rate in the world at 69 percent, followed by India with 52 percent and UK with 42 percent. The fintech in question is the whole, starting from payments, lending, market aggregators, Insurtech (insurance technology), and crowdfunding.

The Indonesian Fintech Association (Aftech) Chairman Kuseryansyah said the national fintech payment has touched many lines of people’s lives in Indonesia. The presence of WeChat Pay and Alipay will add to the dynamics of the fintech payment business in the country.

Moreover, the two firms are also engaged in fintech lending. “Their presence will add to the dynamic and coverage of financial services, especially payment transactions,” he said last week (11/22).

Adopsi Fintech
(Ernst & Young)

The presence of the two Chinese firms is not only supporting the acceleration of equitable adoption of fintech in Indonesia, but also the infrastructure of Internet access, which is the most important thing. This high expectation relies on the government’s strategic projects. If the Palapa Ring is already running, all regions in Indonesia will be connected to the Internet. “I think, Indonesia can be like China or India in the next 2-3 years,” Kuseryansyah said.

According to him, fintech adoption in China and India is very high due to the availability of Internet infrastructure. As long as the access is available and can be accessed by all people, fintech will be adopted. The Ministry of Communications and Information (Kominfo) has targeted the full use of the Palapa ring to run in 2019.

The Forbes report also revealed that infrastructure is a driving factor for WeChat Pay and Alipay growth in China. Internet penetration in China reached 53.2 percent. About 95 percent of internet users are surfing in the Internet using smartphones. The two factors make the services of the two fintech firms highly popular in China.

Internet penetration in China is indeed lower than the US, which reached 83.7 percent. However, based on Forrester’s records, non-cash transactions reached US$ 9 trillion in China, far higher than the US at US$ 112 billion in 2016.

“Alipay and WeChat Pay are very dominant [in China]. This allows business models such as ride-hailing, automated department stores, and virtual prize money to develop there,” Forbes stated some time ago (6/13).

Smartphones are a mandatory item for residents in China. The New York Times had reported that residents in several cities in the country gave tips to street musicians using Quick Response (QR) codes through the payment apps. Transactions at roadside stalls or even renting rooms in five-star hotels also use the QR codes. Prize money (Angpau) are given virtually through the payment platform.

Analysys International, a provider of business information about technology, media and telecom (TMT) industries in China, stated that the fintech payment market in China was US$ 4.7 trillion in the first quarter of 2017. Alipay, a fintech payment owned by Group Alibaba, controlled 54 percent of the market share. Meanwhile, Tencent Holdings' WeChat Pay market was only 40 percent. The market dominated by WeChat Pay rose drastically from 10 percent in the third quarter of 2014.

In Indonesia, Statista data shows the value of digital payment transactions was US$ 18.6 billion in 2017, which was only 2 percent compared to the value of the world’s digital payment transactions. However, the use of electronic money in Indonesia continued to grow to Rp 12,375.5 trillion in 2017 from Rp 981 trillion in 2011.

Transaksi Digital
(Bank Indonesia)

This is not surprising because national fintech payment firms such as PT Dompet Anak Bangsa (Go-Pay), Telkomsel’s financial service mobile app TCash, and PT Visionet Internasional (OVO), have targeted users in many sectors. Besides all three, Indonesia also has other payment services such as DANA, Doku, Yap!, and so forth.

Go-Pay, for example, has already attracted 200,000 partners, 20,000 of which are Micro, Small and Medium Enterprises (MSMEs). As a result, small traders in big cities are already using the Go-Pay services. In addition to donating, the users can buy fuel at the gas station (SPBU), and pay the non-tax revenue of driving license card (PNPB SIM).

TCash has expanded its services from transportation, such as Trans Semarang, to payment of garbage fees, SIM PNBP, water bills, and ticket fines. It also targets an increase in the number of partners from 42,000 per July to 80,000-100,000 by the end of 2018. Meanwhile, OVO has cooperated with 300,000 partners, one of which is Warung Pintar.

Reflecting on this condition, Amar Bank-Tunaiku Managing Director Vishal Tulsian estimates the payment platform will be adopted in all sectors by 2022. “But it takes 10 years to reach all Indonesian people. Even with the presence of WeChat Pay and Alipay,” he told Katadata, some time ago (11/15).

Go-Pay CEO Aldi Haryopratomo is not surprised that Chinese payment service giants also entered Indonesia, which has a very large market. Likewise, TCash CEO Danu Wicaksana said the presence of WeChat Pay and Alipay should increase consumer experience in transactions. “This will be an open ecosystem,” he said.

DANA CEO Vincent Henry Iswaratioso is also aware the presence of the two fintech firms from China would increase non-cash transactions in Indonesia. Moreover, BI plans to issue QR code standardization next year. “For the QR code regulation [if it is already issued], of course we are very enthusiastic as it has been in compliance with existing regulations,” he said.

WeChat dan Alipay
(Katadata)

WeChat Pay and Alipay reportedly entered the Indonesian market through BNI. According to BNI Director of Planning and Operations Bob Tyasika Ananta, BNI wants to take business opportunities from foreign tourist transactions through their collaboration. “The hope is that the results of all studies in November are positive, and most importantly we must be in line with the regulator,” he said.

In this case, providers of foreign payment platform are required to collaborate with national banks in accordance with BI Regulation (PBI) No. 19/8/PBI/2017 on the National Payment Gateway (GPN). The banks in question are those listed in the BUKU IV category (banks with core capital above Rp 30 trillion). The transaction must also be processed in rupiah currency in accordance with PBI No. 17/3/PBI/2015 on Obligation to Use Rupiah in the Territory of the Republic of Indonesia.

BI Deputy Governor Sugeng previously said that the central bank does not see the expansion of foreign payment platform providers to Indonesia as a problem as long as it is carried out in accordance with applicable regulations. “WeChat and Alipay are very important in order to attract tourists, so there is an accumulation of foreign exchange that we really need,” he said.