Technological advancements have accelerated the widespread adoption of digital payments. This advancement has undeniably had a positive impact on transaction efficiency, but it also has some negative consequences for consumers, because digital payment coverage is still insufficient to reach all levels of society, which is referred to as a “digital divide”. The real issue in Indonesia is the digital divide or inequality, which creates a huge disparity and disadvantage for poor people who are unable to access technological and digital benefits.
According to a 2018 survey conducted by the Indonesian Internet Providers Association (APJII), despite the fact that the number of internet users has increased significantly over the last two decades (almost 65 percent of Indonesians are now connected to the internet), there is still an inequality in digital usage; for example, in Java island, which is the most populated and urbanized area, internet usage may cover more than half of the people when compared to other islands. The most pressing question then became how to reduce digital inequality, given that Indonesia has a very diverse population ranging from urban to rural settings, with limited access to digital or electronic payment.
History of Electronic Payment
Electronic payments have a long history in the international community, particularly in Southeast Asia. Southeast Asia, with a population of over 660 million people, can be considered the world’s net gigantic market for digital consumer finance. Approximately 10% of millennial in Singapore, Malaysia, Thailand, Indonesia, and Vietnam already use electronic payment and contribute to the advancement of the region’s economies. Electronic payment was actually pioneered by banks in the 1980s with the introduction of credit and debit cards as payment instruments. It heralds the beginning of the digital payment era because it has the potential to replace cash payments.
Indonesia has absorbed electronic payments since the introduction of m-banking and e-banking, and the way people use payment cards has changed. In 2001, massive e-banking operations began. M-banking and e-banking have become the preferred methods of transaction for many consumers, particularly for online shopping on e-commerce platforms, due to their convenience. The Asian Development Bank then published a Working Paper on Payment Systems, which specifically mentioned non-cash payment systems. It became the starting point for electronic payment’s current ubiquity in Indonesia. Unfortunately, even though the Bank of Indonesia has initiated non-cash payment systems to facilitate the growth of retail payment instruments (such as credit cards, debit cards, and e-money), these payment instruments are heavily reliant on technological advances, and not everyone has equal access to them.
Reducing Digital and Socio-Demographic Gap on Electronic Payment
The socio-demographic dimensions of Indonesia’s digital divide have far-reaching implications for consumers in both urban and rural areas, as well as for the rich and poor. Looking at population dynamics, the World Bank (2017) predicted that the Indonesian population will reach 270 million by 2025, more than 285 million by 2035, and nearly 300 million by 2045. It is extremely difficult to provide such equal coverage of technological advancements with such a large population, especially for those who live in isolated areas where internet connectivity is unavailable, as well as for those who are trapped in poverty, individuals with a lack of education, an ageing population, unemployed groups, and those who are physically impaired. In fact, if this group of people can use electronic payments, their lives will be much easier, safer (because they won’t have to carry cash around with them every day), and they will be more technologically literate.
Furthermore, in order to address the issue of electronic payment, related stakeholders must work together to develop a comprehensive solution that ensures access to and use of technology while also reducing disparities within communities. The strategic solutions are as follows: first, providing user-friendly electronic devices as well as affordable internet service to meet everyone’s needs; and second, providing people in all areas with technological and digital literacy (not only urban but also rural areas). Creating digital inclusion through equal access to technological advancement, high-speed internet, and accessible electronic payment will complement countries’ obligations to provide equal economic and socio-demographic conditions for their citizens. It is very critical to promote adequate digital literacy at all levels of the community in order to create ‘digital citizens’ and improve electronic payment for people, particularly vulnerable groups. Finally, it assigns homework to relevant stakeholders in order to reduce inequality and ensure that everyone has access to the digital benefits of electronic payment.