Booming Digital Economy of Indonesia: Indonesians Increasingly Prefer the Use of Digital Payments

Based on data from Indonesia’s central bank (Bank Indonesia), the transaction value of purchases conducted by electronic (money) payments soared 33.4 percent year-on-year (y/y) to IDR 407.53 trillion (approx. USD $27.63 billion) in Indonesia in full-2022. Besides changing habits in society (with people adjusting to a digital lifestyle), rising purchasing power and growing Internet and smartphone penetration, it’s also the rapidly developing digital infrastructure that facilitates this trend.

And there is room for further growth. Bank Indonesia expects the value of electronic money transactions to come close to IDR 500 trillion (USD $34 billion) in 2023.

Increase in Efficiency and Transparency

Governments and central banks are eagerly facilitating digital payment systems as these payments are more efficient (faster) and transparent (as you leave behind a digital footprint).

In May 2023, at the opening of the Indonesian Digital Financial Economy Festival in Jakarta, President Joko Widodo highlighted the importance of innovation in digital payments to enhance financial inclusion and to bolster efficiency and transparency at government institutions.

Improving transparency at government agencies is important because it is assumed that a significant chunk of public money goes missing each year. For example, in June 2023 Indonesian media widely reported on the Lukas Enembe case, the Governor of Papua who was arrested in January 2023 on bribery charges. Apparently, Enembe’s use of operational funds (that originate from the central government’s State Budget) during the 2019-2022 period included spending on food and drinks at an average of IDR 1 billion (approx. USD $70,000), per day. The country’s Corruption Eradication Commission (KPK) claims Enembe used thousands of fictive receipts to embezzle public money. Based on investigation (by the KPK), one local restaurant in Papua that was mentioned on an invoice denied it had issued this invoice. However, the anti-grant agency said it will need a lot of time to check all thousands of invoices.

One could certainly argue that digital payments narrow room and opportunities for such schemes as the digital footprint clearly shows the source and destination of the transfer. In the case of cash, it becomes much easier to hide certain payments, or, to pretend a payment has been made.

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