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Indonesia plans fixed fees for e-wallet transactions

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Indonesia plans to impose fixed fees on some e-wallet transactions, five people familiar with the matter said, in a move that could choke a key revenue stream and raise costs for payment startups backed by the likes of Alibaba's Ant Financial.

Jakarta

INDONESIA plans to impose fixed fees on some e-wallet transactions, five people familiar with the matter said, in a move that could choke a key revenue stream and raise costs for payment startups backed by the likes of Alibaba's Ant Financial.

Providers of e-wallet services in South-east Asia's largest economy currently customise fees for vendors, charging a premium from big retailers and absorbing costs for smaller merchants in an effort to get them to use their platforms.

But Bank Indonesia has already held talks with the biggest digital-payment startups to make fees on QR code transactions uniform, building on its move in August to standardise electronic payments that use the matrix barcode.

Leading the pack of e-wallet firms in the country is home-grown ride-hailing startup Gojek, backed by firms including Alphabet's Google, and startup OVO, in which Gojek rival Grab has a stake. Ant Financial's e-wallet DANA trails them, along with state-owned payments platform LinkAja.

The central bank wants to fix some e-wallet transaction fees at 0.7 per cent, a move that could deter smaller merchants that now pay next to nothing from staying on the e-wallet network or force the latter to increase incentives.

Fixed fees on payments at bigger vendors, such as Starbucks, that are currently charged as much as 2 per cent would also dent revenue for the e-wallet firms.

The startups have already burned through millions of dollars in incentives to lure vendors in Indonesia, where a multi-billion dollar digital payments industry has flourished as over half its nearly 270 million population have no bank accounts.

The country's Internet economy was worth US$40 billion in 2019 and is expected to grow more than threefold by 2025, according to a report.

Bank Indonesia is yet to decide on fees on transactions made at bigger vendors, the sources said, with one person close to the talks adding it could also be fixed at 0.7 per cent.

A big retailer is typically charged 0.5-2 per cent. As a benchmark, Visa and Mastercard charge 2-3 per cent.

"This will hurt all of us," said an executive at an Indonesian e-wallet firm, who was not authorised to speak to the media and did not want to be named.

Sources said the fee earned on e-wallet transactions would have to be split three ways under the new system: between the e-wallet companies, middle-men payment processors, and the National Electronic Transaction Settlement - a consortium of major Indonesian lenders.

Until now, e-wallet firms either kept the whole fee or split with some payment processors, and no lenders were involved.

Representatives for DANA, GoJek and Ovo did not comment on the uniform rate proposal, but said that Indonesia's move to standardise the QR network was good for the industry. REUTERS