Exploring Indonesia’s Mobile Banking Opportunity

March 3, 2015

Few emerging industries generate equal buzz in both the international development community and private sector. Yet mobile financial services (MFS) have the potential to expand the market to hundreds of millions of new consumers, while promising to drive economic growth at the base of the pyramid by pulling the underbanked into the formal fray.

In Indonesia alone, over 200 million people are financially excluded, exposed to risk, and left to manage their financial portfolios with mostly inefficient informal services. Indonesia’s geography, demographics, and economy make it a prime target for MFS—if MFS ought to work anywhere, it ought to work in Indonesia. Yet eight years after the launch of Indonesia’s first MFS deployment, less than 1% of adults have registered e-wallets.

While industry analysts have correctly cited regulation as a major constraint on industry growth, we found that the failure of MFS to launch is much more than a story of regulatory barriers. Service providers have not taken a consumer-centric approach to product and service design. Current MFS offerings have yet to gain traction with the underbanked because these products fail to address their unmet needs, or add value above and beyond the mostly informal services they already use.

In fact, most MFS products on the market appear designed to compete with formal banking services, rather than cash and the informal financial services most underbanked people use to manage their finances. With this in mind, we spent several months living in three communities in Java exploring underbanked household’s attitudes toward financial management, especially their perceptions of the strengths and weaknesses of cash and informal financial services. The insights we gained enabled us to identify exciting market opportunities for MFS.

In order to turn our insights into action, we engaged key stakeholders including Bank Indonesia (the Indonesian central bank), TNP2K (the Indonesian Vice President’s National Team for the Acceleration of Poverty Reduction), Telkomsel, Indosat, Bank Mandiri and numerous others throughout our research to ensure our work yielded insights that are commercially viable and feasible under current regulations. We have since presented our findings to these stakeholders and others at industry conferences in Istanbul, Singapore, and Jakarta, and will continue doing so next month in New York and Mexico City.

Since our findings alone are not enough to turn insights into action, we recently returned to Indonesia and conducted a design lab where we had regulators, service providers, and fintech companies use insights from our research to develop product concepts. We then tweaked their concepts and built low fidelity prototypes. Two days later, we took these prototypes to the field in Jakarta and tested them with former participants in our study.

The results validated several of our key findings, most notably that underbanked Indonesians strongly demand a simple, one-stop-shop that incorporates a suite of savings, credit, transfer, and payment tools to reduce the costs of managing over a dozen (mostly informal) financial services. Our goal is for these prototypes to guide the development of MFS products that are profitable, scalable, and, most importantly, positively impact the lives of Indonesia’s poor.

Mobilizing Banking for Indonesia's Poor

The full version of our report is available here.

Mobile as a Path to Greater Inclusion
Bundling Services for Greater Impact


Michael Mori Headshot Michael Mori
Michael is a MasterCard Junior Research Fellow with The Fletcher School’s Institute for Business in the Global Context. He also consults with Dalberg’s Design Impact Group and is a member of the International Telecommunication Union’s working group on technology, innovation, and competition. At Fletcher, Michael is working towards a Master’s in international business and market research, and is focused on applying human centered design to international development. Prior to Fletcher, Michael worked with numerous donors and NGOs to design and implement a comprehensive capacity building program for human rights defenders in Indonesia.
Trevor Zimmer Headshot Trevor Zimmer
Prior to his appointment as a MasterCard Junior Research Fellow with The Fletcher School’s Institute for Business in the Global Context (IBGC), Trevor worked with the Clinton Foundation in various capacities—advising Ministries of Health in sub-Saharan Africa, organizing the Annual Meeting of the Clinton Global Initiative, and coordinating the personal office of President Clinton. At Fletcher, he is studying market research and international business in emerging markets. He also consults with Dalberg’s Design Impact Group and is a member of the International Telecommunication Union’s working group on technology, innovation, and competition. He is a graduate of the University of Washington and a native of the San Francisco Bay Area.

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