Can Digital Currencies End Financial Exclusion in Indonesia? Economic Realities and Policy Ambitions

<p>Digitalisation is driving Indonesia&rsquo;s economic development. The empowerment<br> of an efficient system of digital payments is a key underlying factor for the<br> establishment of an inclusive and well-developed digital economy. As a first<br> and fundamental step, the Bank of Indonesia launched the &ldquo;National Cashless<br> Movement&rdquo; (GNNT) in 2014. This vision was further advanced with the &ldquo;Indonesia<br> Payment System Blueprint 2025&rdquo; (IPS), which aimed at boosting digitalisation in<br> the banking industry through open banking and technology developments. As a<br> result, Indonesia&rsquo;s digital economy and finance is recording remarkable upward<br> trends &ndash; such as an increase of 36.9 per cent in e-commerce and 52.6 per cent in<br> fintech lending transactions between 2020 and 2021. Similarly, cashless payments<br> are experiencing a spectacular growth. The usage of the Quick Response Indonesia<br> Standard (QRIS) system, which enhances cashless payment, has doubled. Credit<br> card transactions and e-money usage increased by 20 per cent and 51.6 per cent,<br> respectively, in the same two-year period.</p> <p>In this context of vibrant, quick transformations, a diverse ecosystem &ndash; which<br> comprises incumbent financial institutions, start-ups and technology companies<br> &ndash; is trying to advance Indonesia&rsquo;s digital payments while targeting the goal of<br> financial inclusion. The rise of digital payment solutions indeed provides a unique<br> window of opportunity to tackle the current 92 million unbanked Indonesians<br> and 62 million small and medium-sized enterprises (SMEs) that are excluded from<br> the formal economy in Indonesia.</p>