Digital transactions have become increasingly popular because of the proliferation of new payment methods made possible by technological advancements in the banking industry. Similarly, in Indonesia, digital payment methods are gaining traction, supported by a secure and streamlined payment system which facilitates digital economic and financial operations.
The country’s central bank, Bank Indonesia, reported that the value of electronic money (EU) transactions in Indonesia increased by 11.39% year over year in March 2023. A total of IDR 4,944.1 trillion (about US$33 million) was transacted using digital banking, up 9.88% year-over-year.
Credit card, debit card, and automated teller machine (ATM) transaction values rose 0.45% year-over-year to IDR 707.1 trillion (US$48 billion). As a result, the number of rupiahs in circulation grew by 6.73% yearly to IDR 948.8 trillion (about $64 billion) in March 2023.
“Going ahead, the rise in digital financial and economic activity is projected to continue in line with the growth in community activities and the proliferation and optimisation of user ecosystems,” as Erwin Haryono, Executive Director of the Communications Department at Bank Indonesia (BI) indicated.
Indonesia’s government is actively supporting the country’s digitisation and economic expansion. The work has been done to foresee the emergence of worldwide financial circumstances. The global economy is predicted to expand by 3.2% in 2022, then slow to 2.7% in 2023. As such, the government’s goal is to keep the national economic growth rate at 5.72%. The government forecasts that yearly economic growth in 2023 growth 5.3%.
Indonesia plans to establish regional technical leadership by 2030 through faster digitalisation. About 40% of the value of all digital economy transactions in ASEAN was generated in Indonesia by 2022. This achievement is bolstered by the fact that Indonesia is home to 76.8% of the world’s internet users, has the largest share of the population in its working years, and has more than 2,400 start-up businesses.
The explosion of new businesses in the country is a direct result of the fast growth of the digital economy. Indonesia is the sixth most startup-heavy country in the world, with more than 2,400 companies. To hasten the process, the government has provided various incentives for progress in critical areas, such as enhancing human resource competence.
Indonesian residents need to utilise digital payments to support the expansion of the country’s economy since the digital economy is driving the growth of the whole technology industry in Indonesia. The Ministry of Trade has committed to digitising one thousand traditional marketplaces and one million micro, small, and medium-sized enterprises (MSMEs) across Indonesia as part of its digital transformation agenda. Currently, ten traditional markets employ digital marketing, 51 traditional markets use QRIS for non-cash transactions, and 2,047 traditional markets use local market websites through the Trade Facility Information System (TFIS).
As a result of the government’s digitalisation initiatives, the digital economy is projected to contribute 18% of GDP or around IDR4,531 trillion (US$ 290 million) in 2030 from total Indonesia’s projected GDP of IDR24 thousand trillion (US$ 1.5 trillion). There will be a fivefold growth in the gross merchandise value (GMV) of Indonesia’s digital economy, while the GMV value of Southeast Asia will expand by a factor of two.
Investment in the digital economy in Indonesia has also expanded. In the first three months of 2022, the country attracted investment worth US$3 billion, second only to Singapore. The positive development of the sector has led to projections that its value will double to US$130 billion by 2025 and reach US$220 – US$360 billion by 2030.
The target solidifies the digital economy as a new pillar of the Indonesian economy and cements Indonesia’s position as a leading participant in the ASEAN digital economy. The tech industry was instrumental in helping the country bounce back quickly after the outbreak.