Called LinkAja, the new digital service is expected to debut in March this year with the aim of tapping into an e-payments market that Morgan Stanley estimates will increase to 24% of all non-cash transactions by 2027.
As reported by Nikkei Asian Review, the new venture is likely to have the support of the Indonesian government, which wants to encourage more of the population to join the financial system for the first time – and, consequently, it is expected that more people in rural areas will be targeted.
Telekomunikasi Indonesia, the country’s largest telco, is one of the state-owned enterprises backing LinkAja, along with four banks – Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia and Bank Tabungan Negara.
It is also reported that Pertamina, the state-owned oil and gas giant, is expected to join the initiative, which will be overseen by the Telkomsel subsidiary Fintek Karya Nusantara.
Pertamina’s involvement is significant because the company has a network of around 7,000 petrol stations in Indonesia, often in areas where bank branches do not exist.
If LinkAja can be used across Pertamina’s estate, then that could open up the service to millions of rural consumers and further ramp up the challenge to Go-Jek and Ovo.
Especially if LinkAja also allows payments to be processed via Alipay and WeChat Pay, the mobile payment services run by Chinese e-commerce giants Alilbaba and Tencent Holdings, which Nikkei Asian Review’s sources said are in talks with Bank Negara Indonesia.
However, Go-Jek and Ovo built their leading market share on the back of promotions, such as cash-back offers, and at least one industry insider is sceptical that state-run companies would be nimble enough to offer serious competition.
“I don’t think LinkAja can keep up,” said one observer. “I doubt they will be able to make decisions with the same speed as private companies. It will also be difficult for state-owned companies to burn cash [for promotions and discounts] on the same level.”
Sourced from Nikkei Asian Review; additional content by WARC staff