Can Digital Currencies End Financial Exclusion in Indonesia? Economic Realities and Policy Ambitions

Digitalisation is driving Indonesia’s economic development. The empowerment of an efficient system of digital payments is a key underlying factor for the establishment of an inclusive and well-developed digital economy. As a first and fundamental step, the Bank of Indonesia launched the “National Cashless Movement” (GNNT) in 2014. This vision was further advanced with the “Indonesia Payment System Blueprint 2025” (IPS), which aimed at boosting digitalisation in the banking industry through open banking and technology developments. As a result, Indonesia’s digital economy and finance is recording remarkable upward trends – such as an increase of 36.9 per cent in e-commerce and 52.6 per cent in fintech lending transactions between 2020 and 2021. Similarly, cashless payments are experiencing a spectacular growth. The usage of the Quick Response Indonesia Standard (QRIS) system, which enhances cashless payment, has doubled. Credit card transactions and e-money usage increased by 20 per cent and 51.6 per cent, respectively, in the same two-year period. In this context of vibrant, quick transformations, a diverse ecosystem – which comprises incumbent financial institutions, start-ups and technology companies – is trying to advance Indonesia’s digital payments while targeting the goal of financial inclusion.2 The rise of digital payment solutions indeed provides a unique window of opportunity to tackle the current 92 million unbanked Indonesians3 and 62 million small and medium-sized enterprises (SMEs)4 that are excluded from the formal economy in Indonesia.Horizon 2020 MSCA-RISE, Grant Agreement #87311