A glint of gold in Indonesia’s e-commerce has spelled out opportunity for technoprenuers, beyond the usual throng of online retailers dispersed throughout online shops, forums and social networking sites.
Sensing the lack of a sound payment gateway to ease online shopping transactions, a growing group of tech heads are developing services that will enable people to send and receive payments online.
Indonesia’s largest online community forum, KasKus, introduced KasPay in 2009 in response to members dabbling in selling products including the latest smartphones.
KasPay works as an electronic wallet, or e-wallet. People must link their KasPay account to their bank account. They can then top up this e-wallet via bank transfer with funds between Rp 50,000 to Rp 5,000,000 — the maximum stipulated by a Bank Indonesia regulation on electronic money.
Andrew Darwis, KasKus co-founder, pointed out that so far, 100,000 people have signed up for a KasPay account, with 30 percent of those accounts actively topping up.
“Most KasPay users belong to the KasKus community,” he said.
Andrew added that KasPay was the chosen payment system for purchases, such as mobile phone vouchers (e-Pulsa), on other partner websites including disdus.com, Indonesia’s version of Groupon.
“E-pulsa is our method of acquiring and educating users on using KasPay,” he said, given the familiarity of the public with electronic vouchers. “That’s why we don’t take profits from e-pulsa.”
For many payment gateways, their services mimic those offered by US-based PayPal.
However, given the lack of credit card ownership amongst Indonesians and the need to adhere to local regulations, e-wallet top ups via bank debits have become the product of choice.
Rieke Ustadiyanto, one of the founders of the Bali-based payment gateway iPayMu, pointed out that payment gateways made transactions more secure and controlled.
For one, buyers did not have to expose their account information to merchants because their payment gateway would act as an intermediate to all payments, Rieke noted.
Besides e-wallet or debit card services, iPayMu also offers escrow and money services to their approximately 3,000 account holders mostly made up of small and medium enterprises.
Through the escrow system, iPayMu would channel payments deposited by buyers to merchants only after the purchaser has confirmed that the ordered goods have arrived.
He added that the money transfer service allowed users to deposit and withdraw money from any of the 87 banks, in addition to state postal agency PT Pos Indonesia, who have partnered with iPayMu.
“It was really hard to get the banks,” Rieke said with regard to convincing the banks to link up to iPayMu.
“They welcomed the idea but needed to verify our system,” he said, adding that they planned to expand their services to credit cards by April.
One point of hesitation for companies in offering credit card payments is the legal complexity in offering such services, not to mention the heightened risk of fraud. Thus, banks are also cautious in allowing payment gateways to access the credit card system.
However, on a slightly different business model, payment gateway company Doku, offered services in 2007 to enterprises needing a system to enable online payments.
“We cooperated with banks that had already obtained licenses from Visa and MasterCard,” Himelda Renuat, Doku chief marketing officer, said.
She added that they had around 250 clients on their list, ranging from telecommunications companies in need of e-wallet systems to smaller businesses such as car rentals.
She further said that processing credit cards meant handling bigger payments, given that state carrier Garuda used their services for online ticket purchases, but removed the risk of managing floating funds.
Like other payment gateway providers, Doku was aware of the risk of credit card fraud.
“That is why we have set up parameters within our system that score transactions as genuine or suspicious,” she said, adding that they worked with banks in detecting blacklisted card numbers.
She further said that clients were also consulted on ways to deflect fraud, such as advising hotels to request guests to show credit cards upon checking in.
“We provide abundant information on the basics of ‘know your customer’ procedures,” she said,
claiming that these measures have made the number of fraud cases negligible.
There are certain issues hampering the growth of these companies though. Many insiders have pointed out that the regulation on e-payments left many aspects vague.
“The regulation legally defines e-money as cards, chips or electronic gadgets used as payment tools, whereas iPayMu does not fit into any because it is a non-bank institution for payment finalization,” Rieke said.
Wiku Baskoro, a blogger at DailySocial, added that Indonesian shoppers had not become more amenable to paying online due to trust issues.
None of the payment companies have achieved a ubiquitous presence around e-commerce sites, which would have been more convenient for e-shoppers, he added.
“Banks are the ones who should take charge or there should be one non-bank institution that manages these payments,” he said. “Banks would also offer a greater sense of security.”
Bank Central Asia recently launched KlikPay, an online payment system for their debit and credit card holders.
However, payment systems remain lucrative business. Doku charges fees to clients depending on the size and complexity of the client’s business.
Rieke added that their users top up an average of Rp 100,000 in the e-wallets, which iPayMu pooled in their corporate bank account.
“You can calculate yourself the size of our floating fund from those 3000 merchants,” he said.