Digital payments create new opportunities for unbanked Indonesians

In Indonesia, the majority of the population do not have bank accounts or credit cards. The use of digital payment methods, however, is rapidly increasing. In her PhD project, Sunniva Sandbukt investigates how a digital economy and blockchain-based currencies could come to benefit ordinary citizens.

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In the Western world, living a normal life without a bank account is impossible. In Southeast Asia, things look quite different. Here, a large segment of the population is taking a tiger leap from a cash-based to a digital economy – entirely bypassing the traditional bank system.

"The World Bank estimates that two thirds of Indonesians don’t have a bank account, while estimates say that more than 95 percent have access to a mobile phone. As a result, a range of digital tools have emerged that meet the need for making financial transactions without bank involvement. You could say that key socioeconomic functions have become 'appified'," says Sunniva Sandbukt, a PhD student at the IT University of Copenhagen.

Digital financial services in Indonesia range from money-transfer apps to digital lending clubs and apps that let you order and pay for cleaning or groceries.

Vulnerable groups likely to be left behind

Although digital services can provide poor people with access to otherwise inaccessible financial services, the emerging digital economy is also highly complex and risky waters with many stakeholders, says Sunniva Sandbukt.

"Taking the cultural, political, social and economic context into consideration is important when implementing new financial systems in society. The tech companies that deliver the systems don’t necessarily have an insight into the interaction between existing societal structures and the new digital economy," she says.

She points out that the rapid spread of digital payment systems may worsen the situation of vulnerable groups.

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People who already have resources tend to be quickest at taking advantage of new opportunities, while the poorest people lag behind.

Sunniva Sandbukt, PhD student
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"In Denmark, we are already seeing that people donate less to the homeless because we don’t carry cash anymore. Similarly, it’s easy to imagine that an Indonesian kiosk owner who is unable to offer digital payments being run out of business by competing stores that provide customers with this opportunity. People who already have resources tend to be quickest at taking advantage of new opportunities, while the poorest people lag behind," she says.

Blockchain systems have potential

At a societal level too, a number of potential risks are associated with the digital economy – among other things issues around taxation and data protection.

"Indonesia currently has no data protection legislation. This means that the digital transactions are conducted by private companies that aren’t subjected to any regulation. They are simply trusted to behave properly and protect people's data," says Sunniva Sandbukt.

She believes that blockchain-based transaction services have the potential to push the digital economy in a direction more beneficial to ordinary citizens.

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Blockchain allows us to create payment systems that aren’t centralized in specific companies. This means that no company decides whether you are entitled to make a transaction, and that no central unit capitalizes on it.

Sunniva Sandbukt, PhD student
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"Blockchain allows us to create payment systems that aren’t centralized in specific companies. This means that no company decides whether you are entitled to make a transaction, and that no central unit capitalizes on it. This could make transactions cheaper and available for people who can’t afford traditional banking services today. I don’t believe that access to financial services in itself leads to economic equality, but I hope that the new payment systems will lead to more financial autonomy," she says.

Further information

Vibeke Arildsen, Press Officer, phone 2555 0447, email viar@itu.dk