The presentation talks about Digital Financial Services available in Indonesia. It discusses the customer's perspective. What challenges and opportunities lie ahead?

1. 1
Public Workshop
Digital Financial Services (DFS)
DFS from Customer View :
The Potential and Challenges
Date: 12 June 2014
Prepared by: Spire Research and Consulting

2. 2
Research Methodology, Respondent Selection and
Criteria
Respondent Selection
Unbanked or under-banked (they have
bank account but has been deactivated
more than 3 months ago)
Formal and informal salaries
In productive age (17 – 55 years)
Men and women
Social Economic Class : C, D, E
Mobile phone ownership
Engaged in routine financial transactions
(e.g. purchase of goods, purchase school
purposes, payment of household goods)
No. Industry Sector
1. Agriculture, Plantation, Forestry, Hunting & Fishery
2. Mining and Quarrying
3. Industry
4. Electricity, Gas and Water Supply
5. Construction
6 Trade, Hotel and Restaurant
7 Transportation, Warehouse and Communication
8 Finance, Real Estate, Building rent and service
9 Social and individual service
10 Entrepreneurs/ Others
North Sumatera
South Sumatera
DKI Jakarta
Central Java
East Java
East Nusa
Tenggara
South
Kalimantan
East Kalimantan
South Sulawesi
ResearchApproach
Qualitative
Quantitative
Face-to-face interview with 1,080
respondents in 9 targeted
provinces
Focus Group Discussion (FGD in
each targeted city, 18 FGDs in total

3. 3
Customer Financial Literacy and Current Activities
Airtime Top Up and Bill
Payments are the most
common financial activities
that consumers go through.
Interestingly, savings come as
the third most often financial
activities done by the
consumers
Current Financial Activities
Overall, unbanked and under-
banked population in
Indonesia are most well known
for SAVING and LOANS as
financial products.
In addition, customers in urban
area more familiar with e-
banking services than rural
area.
Financial Literacy
*) E-Banking includes ATM, SMS banking, internet banking and phone banking. Other services includes remittance, safe deposit box.

4. 4
Customer Financial Activities
Details of Current Financial Activity Provider and Expected
Features on Air Time Top Up Product
The location to buy their air time top-up for their mobile
phone : Air Time Top Up Shop (61%), Hand phone Shop
(30%) and Convenience Store (5%)
Reason to buy airtime top up at that place : Near from
home (77%), Stock availability (33%) and Cheap (16%)
Frequency to buy air time top up : Weekly (90%),
Biweekly (5%) and Daily (3%)
Actual Amount of air time top up customers: IDR 10,000
(44%), IDR 20,000 (31%) and IDR 50,000 (27%)
Current provider Expected Features on DFS Product
Average amount of air time top up : IDR 20,000
(59%), IDR 50,000 (27%) and IDR 100,000 (7%)
Frequency to buy air time top up : Weekly
(84%), Biweekly (9%) and Monthly (7%)
Air Time Top Up
Current Financial Activities

5. 5
Average amount of money for bill payment per
month :
< IDR 50,000 (41%), IDR 50,001-100,000 (37%) and
IDR 100,001 – 150,000 (14%)
Administrative cost :
< IDR 10,000 (95%), IDR 10,000-20,000 (3%) and
> IDR 20,000 (2%)
Location : PLN Branch Offices (60%), PDAM Branch
Offices (30%) and Agent (5%)
Frequency : Monthly (66%), Daily (27%) and Weekly
(6%)
Actual Amount : IDR 50,001-100,000 (56%), < IDR
50,000 (22%) and IDR 100,001 – 150,000 (12%)
Mostly customers said that their payment method for
bill payment is in cash.
Challenges in using cash payment methods include
long queue (31%), Location far from home (15%) and
Inconvenience in service (6%)
Bill Payment
Customer Financial Activities
Details of Current Financial Activity Provider and Expected
Features on Bill Payment Product
Current Financial Activities
Current provider Expected Features on DFS Product

6. 6
Saving
Amount of savings per month :
> IDR 200,000 (42%), < IDR 100,000 (35%) and
IDR 100,000 – 200,000 (23%)
Minimum Balance :
< IDR 10,000 (34%), IDR 10,000 – 50,000 (36%) and
IDR 50,000 – 100,000 (17%)
Location : Arisan (46%), Keep the money by myself
(45%) and Cooperative (6%)
Frequency : Monthly (42%),; Seasonal (27%) and
Weekly (17%)
Actual Amount : IDR 10,000 – 50,000 (45%), IDR 50,001
– 100,000 (35%) and > IDR 100,000 (17%)
Reason for saving : Investment (47%), Education plan
(30%) and Health Preparation (20%)
Customer Financial Activities
Details of Current Financial Activity Provider and Expected
Features on Saving Product
Current Financial Activities
Advantages and Disadvantages for Saving in Arisan
•Arisan is also perceived as a place to
socialize with their neighbor –
hangout and chat with their friends
•Flexibility in withdrawal of money
(+) • No legal guarantee/
unofficial – trust based only
among the member
(-)
Current provider Expected Features on DFS Product

7. 7
Loans
Amount of money for loan : < IDR 250,000 (54%),
IDR 250,000 - 500,000 (28%) and > IDR 500,000
(18%)
Loan rates per year : 2.5% – 5% (76%), < 2.5%
(14%) and > 5% (10%)
Tenure : monthly (48%), biweekly (5%) and daily
(1%)
Location : Family member (40%), Cooperative (34%)
and Personal contact or friend (5%)
Term for loan : 6-12 months (22%), > 12 months (21%)
and 3 – 6 month (18%)
Actual Amount : IDR 50,000 – 500,000 (59%), IDR
500,001 – 1,000,000 (21%) and IDR 1,000,001 – 2,000,000
(11%)
Reason for loan : Buying urgent needs requires high
cost (60%), covering routine expenses (50%) and
sudden illness (33%)
Customer Financial Activities
Details of Current Financial Activity Provider and Expected
Features on Loans Product
Current Financial Activities
• No interest rate,
negotiable tenure
• Limited amount
• Not always available as per
convenience
• Usually only for amount under 1 million
Advantages and Disadvantages Loans from family member
(+) (-)
Current provider Expected Features on DFS Product

8. 8
Reason for
deactivating and not
opening bank
account
• Expensive administration cost and no time to go to Bank are major issues why customers
deactivate and not open bank account.
• Monthly administration cost and minimum balance are perceived and stigmatized to be higher
by unbanked people. These have became reasons for them for not opening a bank account.
Reason for Deactivating and Not Opening Bank
Account

9. 9
Mobile Phone Usage and DFS Services Perception
100% respondents using prepaid card.
Most respondents are reluctant in using
mobile phone for financial transaction:
It is perceived as a complicated
process – limited access towards
knowledge of transaction using
mobile phone
Many concerns over failed
transactions that can cause
monetary loss
Security issue – losing their phone
which signifies confidential data
might be misused by other people

10. 10
Expenses Allocation for Financial and Non-Financial
Needs
Financial Needs
In rural area, saving allocation tends to be
slightly higher than in urban area.
One of the main offerings through DFS to be
further explored
On average, food cost expense is higher in
rural area than urban for overall monthly
expenditure.
Others category for Non Financial needs
comprises of house rental, transportation,
school fees and so forth.
54% Non
Financial Needs
46% Financial
Needs
Non-Financial Needs
Food cost
34%
Payment for
household
goods and
electronics
6%
Saving
9%
Pay loan
installments
(motorcycle,
credit etc)
9%
Payment for
airtime top-
up
7%
Bill Payment
21%
Others
14%
99% of customers use cash
as payment method for both
financial and non-financial
needs.

11. 11
Providers of Non-Financial Needs
• Near location (e.g. Warung)
• Time efficient – close their residence
• Cost efficient – can be reached by walk
•Cheap (e.g. Traditional market, Warung)
• For those with budget constraints, price bargain
is very helpful in reducing expenses
• Complete items (e.g. Traditional market)
•One stop shopping – time efficient
•Many choices
• Trustworthy (e.g. Apotik Kimia Farma,
Electronic store)
• Guaranteed – secure
Providers, Payment Methods and Advantages of
Current Non-Financial Needs
Most of the customers use Traditional Channel as
their providers of non-financial needs.
WHY?

12. 12
Interest Level for DFS Product and Preferred Agent
Top 3 of most interesting products for DFS:
Conventional banking products like saving and
loan come as two of top 3 products, reflecting the
interest level of consumer, in-line with current
financial literacy level and activities
Air time top-up is also categorized as one of the
most interesting products. However, the current
providers/channels are already better
established
Saving
Air-Time Top-Up
Loan
Agent Private
Entity
•Mom and pop
outlets
•Gas station
•Convenience
store
Agent State-
Owned Entity
•Post office
•Government
office (e.g.
Kelurahan,
Kecamatan)
•Puskesmas
Agent SME
Employer
•SME factories
•UMKM
Master Agent
Entity
•Cooperatives
•Formal
wholesalers
•Agent formal
distributors
Agent
Corporate
Employer
•Large
corporate

13. 13
Expected Services and Preferred Promotional Activities
Expected services from the agent:
Elaborate explanation, guidance
and assistance are always being
emphasized by consumers, in-line
with preferred promotional activities
as well as current financial and
technology literacy.
Assistance/advisory services
Pick-Up Services
Longer operating hours (8am to 8pm)
Preferred Promotional Activities:
Gifts (rewards for customers for any
specific transaction value or volume)
Seminars
Local event (e.g. music show, etc.)

14. 14
Trust is one of crucial factor that needs to be guaranteed in applying DFS through
selected Agents
Trust might be generated by official
attributes from related Bank
• Sign board or information
board that is applied and
supported by the bank
• Certificate of banking
knowledge training
• Certificate of official
assignment from the
bank
• Have an official ID
Card
“Put a sign board depicting
the bank, it will make the
place look more official. This
will make people aware of
availability of DFS.”
“People in Kelurahan
currently need training as
banking terms would
become more complicated.
Thus, it needs more skilled
people.”
Expected Attributes to Generate Trust – Requirements
of Agents

15. 15
Reason of Switching Factors and Loyalty in Using DFS
Factors for Customer to Stop Using DFS
Difficult to Operate
High Price/Cost
Difficult Administrative Process
Far from Home
Factors for Customer to Continue
Using DFS and refer it further
Convenience
Easiness to Access
Discount Per Transaction
Loyalty and reward program
The main reasons for loyalty and
willingness to use the service
include convenience and easiness
in service
Other important note is that the
consumer expectation changes
when there are no drastic changes
regarding the products post their
launch as well as for offerings

16. 16
Tel: (62-21) 5794 5800
Fax: (62-21 5794 5808
Wisma 46 Kota BNI, 25th Floor, Unit 07 & 09
Jalan Sudirman Kav. 1, Jakarta 10220
INDONESIA
id.info@spireresearch.com
www.spireresearch.com