According to data and analytics company GlobalData, Indonesia’s e-commerce market is expected to register a robust 23.8 percent growth in 2022 and reach IDR420.8 trillion (US$30 billion) in 2022.
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E-commerce payments in Indonesia are forecasted to rise further at a compound annual growth rate (CAGR) of 22.0 percent between 2021 and 2025, to reach IDR753.8 trillion (US$53.8 billion) in 2025.
E-commerce sales in Indonesia registered sustained growth over the last few years supported by rising Internet and smartphone penetration, growing middle class population, and proliferation of online merchants and payment tools. Furthermore, the COVID-19 pandemic made online shopping more appealing among consumers due to social distancing and lockdown restrictions.
“Online shopping is popular in Indonesia, a trend that has become more prevalent amid the COVID-19 pandemic. The recent outbreak of the Omicron variant has further led to the resurgence of new cases, the highest in the last six months, which is likely to drive online shopping,” said Nikhil Reddy, Payments Senior Analyst at GlobalData.
To drive consumer spending and push e-commerce sales, the Indonesian government in collaboration with 72 e-commerce companies launched a shopping event named ‘2021 Indonesia Made Shopping Day (BBI) Program’, which was held between 5th May and 13th May 2021. Various discounts and cashbacks as well as free delivery were offered to encourage consumers to shop online.
The growth in e-commerce led to a surge in the use of electronic payments, with alternative payments being the major beneficiaries. According to GlobalData’s 2021 Financial Services Consumer Survey which was conducted online during Q1-Q2 2021 with 52,742 consumers across 42 markets, alternative payment tools collectively accounted for 46.7 percent share in the total e-commerce value in Indonesia, up from 30.9 percent in 2020, with OVO alone accounting for 18.5 percent share.
The rise in e-commerce is also supporting the emergence of new payment models such as buy now pay later. The Indonesian buy now pay later market is crowded with several players including banks and payment service providers offering this service, some of them being Kredivo, Atome, SPayLater, and GoPayLater.
Digital-only bank TMRW is among the latest to join the list with the launch of its pay later solution TMRW Pay in December 2021, allowing users to pay for online purchases in installments up to nine months at partner e-commerce platforms.
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“The COVID-19 outbreak has accelerated consumers’ shift from in-store to online payments. The uptrend in e-commerce sales is likely to continue over the next few years, supported by government initiatives, growing consumer preference and improvements in payment infrastructure,” concluded Reddy.