With 267 million citizens spread across 14,000 islands and 70% of the population without access to traditional financial system, Indonesia is a country filled with opportunities.
Mobile Tunai Indonesia (MTI) has partnered up with BPC to embrace the opportunities this archipelago has to offer.
One of them is boosting financial inclusion and serving the underserved, by establishing a branchless banking service built through a network of trusted agents. It is carried out in the form of an online payments platform, which caters to the people’s daily financial needs.
The challenge
No one size fits all – assessing the market
Prior to launching the service, MTI delved into the target market and researched the financial needs of the population in rural Indonesia. How were day-to-day payments done locally? Who are the potential customers? Which alternatives are there on the market?
During this market research, MTI determined who were the people in the communities holding trust and respect, identified cultural aspects unique to the areas and measured the extent to which these cultural aspects are linked to financial activity. MTI examined which of their offered services would solve an actual problem by looking at payment behaviour of local Indonesians and solutions that have been launched in the market before.
Key findings
As a result of this research, it became clear the majority of Indonesians living in rural Indonesia still rely on cash and lack access to basic financial services.
1. Arisans system
The financial system consists largely of a, what they call, arisans system: a structure whereby a community of people – ranging from 10 people to a few hundred – meets on a regular basis and agrees to save and borrow money together.
2. Trust banks
Research also highlighted that the society relies heavily on trust banks, who arrange a daily collection of small sums of money in cash, pay lump sums back to their customers after one year – usually just before Ramadan takes place – and charge interest and penalty fees for early withdrawal.
Seizing the opportunity
These findings open up a range of opportunities for companies looking to boost financial inclusion in rural Indonesia. One of them is providing this demographic with a new secure, fast, reliable and easy to use an alternative payment method to cash payments.
The solution
MTI partnered up with BPC to tap into this opportunity. Together they developed a new payment platform which offers solutions to a number of basic financial services, including: facilitating peer to peer transfers, bill payments, airtime top-up and payments for social security.
While in the process of launching this platform, certain limitations had to be taken into account:
limited 3G/4G coverage
a majority of the population without access to the traditional bank accounts
dependency on mobile.
Moreover, it had to be ensured that access to the service would not be tied to physical locations. Therefore, MTI and BPC decided to recruit a network of trusted agents to onboard clients and deliver financial services locally.
To facilitate transactions and allow them to be executed in less than 1 minute, the service had to function on feature phones by using USSD technology or on more sophisticated mobile devices by installing an Android app.
With these two conditions in place, physical presence and the cost of this presence could be eliminated, while the impact remains the same, as the human factor is embedded in the form of local, trusted individuals acting as agents. The agents representing MTI are instrumental to the success of this agency network model.
The results
MTI’s branchless banking enhances the convenience and outreach of affordable financial services to an underserved segment of the population in a cost efficient manner.
The costs of opening branches or setting up ATMs in remote locations are high. MTI offers a more cost efficient solution by leveraging networks of existing retail outlets.
Addressing the challenges
Given this solution taps into an entirely new market, flexibility is important, as MTI needs to be able to adjust to the needs of the market as it evolves.
Also, when creating a new digital payments ecosystem, the IT infrastructure needs to be reliable, given you’re in the process of earning trust of a new demographic.
Despite that fact that it was assumed all transactions were going to be made over the USSD channel during the early stages of the project, user tests quickly revealed that a smartphone application integrated with the USSD platform was needed to encourage usage of the system.
Partnership as the key to success
For MTI, partnering with BPC, a reputable specialized payment solution provider, has proven to be the right choice. Outsourcing the development of a financial platform while monitoring the technical process, allows MTI to focus on building relevant use cases for their clients.
About BPC
BPC was founded 20 years ago and as true ‘globetrotters in fintech’ it is now active in 78 countries. For more than 200 clients, BPC powers payments across the globe by supplying software and creating ecosystems in which banks, processors, merchants and other ecosystem players, such as governments, can thrive. BPC is bridging real life to digital. Banking, Payments: Context – this is what and who we are about at BPC. It’s all about creating relevant services for the customers of our clients, fitting in the context of their business or daily life.
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