Homemade Banking: E-Money Services Emerge in Indonesia

The Wall Street Journal

12 Aug 201506:43

Summary

TLDRIn Jakarta's outskirts, Mr. Hardianto, a former Navy officer, has transformed his home into a bank branch, offering services for a local electronic money service called 'e-cash'. As a bank correspondent, he enables the unbanked to open accounts, cash in/out, transfer funds, and pay utilities, all through their mobile phones. Despite regulatory challenges and limited marketing, Hardianto has opened over 500 accounts since 2014, promoting financial inclusion in Indonesia where most people rely on cash and lack bank accounts.

Takeaways

🏢 The script discusses a local electronic money service called 'eash' that operates in Jakarta's outskirts, serving as a bank branch for the unbanked population.
👤 Mr. Hardianto, a former Navy officer and community leader, acts as an agent for 'eash', providing banking services to his neighborhood through his mobile phone.
📲 Customers can receive money directly into their mobile phone accounts, which they can use for various transactions, such as buying phone credit and paying bills.
🏦 Bank Mandiri is involved in this initiative, aiming to reach the 160 million unbanked Indonesians, with over 2000 agents and a focus on branchless banking.
📈 The service is part of a government effort to democratize banking services, especially in areas where people primarily use cash and do not have bank accounts.
📈 There is a significant potential market, with around 180 to 200 million mobile subscribers, which could be converted into banking customers.
🏘️ The service is particularly beneficial for low-income communities, who traditionally have limited access to banking services.
🚫 Regulatory confusion and uncertainty are barriers to the expansion of mobile money services, limiting advertising, marketing, and the establishment of agent networks.
📈 Mr. Hardianto has successfully opened over 500 electronic money accounts since October 2014, indicating the service's acceptance in his community.
📚 Education is highlighted as a key obstacle to the adoption of branchless banking, suggesting a need for increased financial literacy.
🔢 Transactions are currently limited to less than 50,000 rupiah, and eash accounts do not offer interest, which may restrict the service's appeal and utility.

Q & A

What is the main service provided by Mr. Hardianto in his neighborhood?
-Mr. Hardianto provides services as an agent for a local electronic money service called 'eash,' allowing customers to credit money into their mobile phone accounts, buy phone credit, pay electricity bills, and purchase supplies at local stores.
How does the eash service benefit the unbanked population in Indonesia?
-The eash service benefits the unbanked population by offering a no-frills, no opening fee, and no minimum balance electronic money account that they can manage remotely through their mobile phones.
What is the significance of Mr. Hardianto's role as a bank correspondent?
-As a bank correspondent, Mr. Hardianto facilitates financial transactions for those without bank accounts, making banking services more accessible to the community and promoting financial inclusion.
How does the eash service work for customers who want to open accounts or make transactions?
-Customers can visit Mr. Hardianto's place to open accounts, cash in and out, transfer funds, and pay utilities, similar to a bank branch but run by a third party instead of directly by Mandiri Bank.
What is the demographic that Mr. Hardianto primarily serves, and why are they unbanked?
-Mr. Hardianto primarily serves the lower-middle class and below, who are unbanked due to various reasons, including lack of awareness about banking services and not having a bank account.
What is the role of mobile phones in facilitating branchless banking in Indonesia?
-Mobile phones play a crucial role in branchless banking by acting as a medium for people to access banking services remotely, such as opening accounts, making transactions, and paying bills, without the need for a physical bank branch.
How does the eash service address the issue of regulatory confusion in the mobile money industry?
-The script does not provide specific details on how eash addresses regulatory confusion. However, it implies that simplifying the rules and reducing regulatory uncertainty could help expand services like eash.
What are the limitations Mr. Hardianto faces in promoting eash accounts in his community?
-Mr. Hardianto faces challenges such as limited interest from the community, regulatory confusion, and restrictions on transaction amounts, which are capped at less than 5 million Indonesian Rupiah.
What is the potential number of electronic money accounts in Indonesia based on mobile subscribers?
-The potential number of electronic money accounts in Indonesia is estimated to be around 180 to 200 million, based on the number of mobile subscribers in the country.
How does Mr. Hardianto use his role as a religious leader to promote branchless banking?
-Mr. Hardianto preaches about the benefits of branchless banking during local mosque gatherings, using his influence as a religious leader to educate and convince the community about the advantages of using eash services.
What are the educational obstacles preventing the widespread adoption of branchless banking in Indonesia?
-The script suggests that a lack of education about the benefits and usage of mobile money services is one of the obstacles preventing the widespread adoption of branchless banking in Indonesia.

Outlines

00:00

🏦 Community Banking Transformation

The script describes the innovative banking practices in a poor neighborhood in Jakarta, where a former Navy officer, Pak, has turned his house into a bank branch-like service center. He acts as an agent for a local electronic money service called 'eash', allowing customers to perform banking transactions through his mobile phone. This service is particularly beneficial for the unbanked population, who can now open accounts, cash in and out, transfer funds, and pay utilities without the need for a traditional bank account. The government's initiative aims to bring financial products to the 160 million unbanked Indonesians, leveraging the widespread use of mobile phones. The script also mentions the potential for growth in this sector, with the number of mobile subscribers indicating a possible 180 to 200 million users.

05:01

📢 Outreach and Challenges in Branchless Banking

This paragraph discusses the challenges faced in promoting branchless banking in the community, despite the efforts of Mr. Harianto, who also serves as a religious leader. He attempts to educate the community about the benefits of electronic banking during local mosque gatherings. However, the uptake is slow due to limited understanding and the current restrictions on transaction amounts and lack of interest on eash accounts. The script highlights the need for education and regulatory clarity to expand the reach of mobile money services, which could include micro loans and insurance. The manager of Bank Mandiri suggests that simplifying the rules could pave the way for new financial products and services.

Mindmap

Keywords

💡Asalamualaikum

Asalamualaikum is a traditional Islamic greeting which means 'peace be upon you'. It is used in the script to open and close conversations, reflecting the cultural context and setting of the video, which appears to be in an Islamic community. The greeting sets a respectful and community-oriented tone for the interactions depicted in the video.

💡Bank branch

A bank branch refers to a location where banking services are provided to customers. In the script, the term is used metaphorically to describe how Mr. Hardianto's house serves as a local hub for banking services in a neighborhood without a traditional bank branch, illustrating the innovative approach to providing financial services in underserved areas.

💡Bank correspondent

A bank correspondent is a financial institution that provides services on behalf of another bank. In the video's context, the bank correspondent is Mr. Hardianto, who facilitates banking transactions for his community using an electronic money service called 'eash', highlighting the role of agents in extending banking services to the unbanked population.

💡Unbanked

Unbanked refers to individuals or communities that do not have access to or do not use banking services. The script discusses the government's effort to bring financial products to the unbanked population, emphasizing the importance of mobile money services in reaching those who traditionally have been excluded from the formal banking system.

💡Electronic money

Electronic money, as mentioned in the script, refers to digital forms of currency used for financial transactions. The script discusses 'eash', a local electronic money service that allows people to conduct transactions remotely, showcasing the potential of technology to democratize access to financial services.

💡Mobile phone money account

A mobile phone money account is a digital wallet linked to a mobile phone number, allowing users to store and transfer money. In the script, it is used to illustrate how individuals can receive credits and make payments without needing a traditional bank account, underscoring the convenience and accessibility of mobile banking.

💡Branchless banking

Branchless banking is a model of banking that does not require physical bank branches. The script mentions that Bank Mandiri has over 2000 'er lo AG' (possibly a typo or misheard term), suggesting a significant expansion of banking services without the need for physical infrastructure, which is crucial for reaching remote or underserved communities.

💡Agent

In the context of the script, an agent is an individual who acts on behalf of a financial service provider to offer services to customers. Mr. Hardianto is described as an agent for the 'eash' service, emphasizing the role of local agents in facilitating access to financial services in branchless banking models.

💡Regulatory confusion

Regulatory confusion refers to the uncertainty or lack of clarity in regulations that govern a particular sector or service. The script mentions that regulatory confusion is making it harder for mobile money providers to expand their services, indicating the challenges faced by the industry due to unclear or complex regulatory environments.

💡Micro loans and micro insurance

Micro loans and micro insurance are financial products designed for low-income individuals or small businesses, providing them with access to small-scale credit and insurance coverage. The script suggests that once the regulatory framework is simplified, these products could be offered alongside transaction services, indicating the potential for a broader range of financial services in branchless banking.

💡Education

In the script, education is mentioned as one of the obstacles preventing branchless banking from taking off. It implies that a lack of understanding or awareness about financial services and technologies could hinder the adoption of branchless banking, emphasizing the importance of financial literacy in expanding access to banking services.

Highlights

A former Navy officer in Jakarta has turned his house into a bank branch for the poor neighborhood, offering services at all hours.

He is an agent for a local electronic money service called eash, allowing customers to credit money to their mobile phone accounts with a few clicks.

Customers can use the electronic wallet to buy phone credit, pay electricity bills, or buy supplies in local grocery stores.

The unbanked population in Indonesia is 160 million, with 60% of the population owning a mobile phone.

Mobile money subscribers can choose from several platforms to get no-frills, no opening fee, no minimum balance electronic money accounts.

These mobile wallets are expected to democratize banking services in Indonesia, where most people still use only cash and don't save money due to lack of bank accounts.

Bank Mandiri has more than 2,000 agents for branchless banking as part of a government effort to bring financial products to the unbanked population.

The agent network allows unbanked customers to open accounts, cash in/out, transfer funds, and pay utilities, similar to a bank branch but run by third parties.

The agent in the transcript has been a trusted community leader for a long time, which makes him a reliable eash agent for Bank Mandiri in the area.

Education is one of the obstacles preventing branchless banking from taking off, as many people are not familiar with the concept.

Regulatory confusion is making it harder for mobile money providers to expand their services due to uncertainty in advertising, marketing, and agent network creation.

Simplifying the rules for branchless banking would open the way for offering new products like transaction bases and saving accounts, as well as micro loans and insurance.

The agent also preaches about the benefits of branchless banking at the local mosque, trying to convince the community of its advantages.

Transfer limits are currently set at less than IDR 50,000, and eash accounts do not pay interest, which may limit their appeal and use for larger transactions.

The agent has opened more than 500 electronic money accounts since October 2014, showing the potential for growth in branchless banking in Indonesia.

The government and financial institutions are working to bring banking services to the unbanked population, making financial inclusion a priority.

Mobile money accounts have the potential to reach around 180-200 million users in Indonesia, based on the number of mobile subscribers.