A barcode unlocks Indonesia’s billion-dollar informal economy

Cross-border QR transactions will soon be possible in Asean 

by CLAIRE JIAO & GRACE SIHOMBING 

FROM food carts lining Jakarta’s raucous streets to wet markets in Indonesia’s most remote villages, one type of barcode is becoming ubiquitous. 

The quick-response code, or QR, lets customers make payments by scanning it with their mobile phones. It’s fast, easy and cheap for merchants — applying for your own QR code costs less than US$2 (RM8.85) — helping it find widespread adoption among satay stalls and roadside sellers known as warung. Cash is making less of an appearance, and some shops won’t accept it at all. 

The uptake is paving the way for Indonesia to capture the billions of dollars of informal economic activity overlooked in taxation and even statistics due to small businesses’ reliance on cash. 

Over 22 million merchants have signed up and the total is set to double this year to 45 million. That’s about half the number of merchant locations accepting Visa payments globally. 

“I applied for QR because buyers kept asking for it,” said Widodo, 47, who sells rujak buah or fruit salad topped with spiced palm sugar on the back streets of Jakarta’s business district. He got a QR code in January, after 25 years of accepting only cash. Today, a third of his daily revenue comes via QR payments. 

He’s found it more convenient, not just for his customers, but also himself. With buyers using e-money to transact, his hands are freed up from having to collect bills and give out change. Instead, Widodo makes quick work cutting up mangoes and pineapples to satisfy the crowd of office workers waiting for their snack. 

Merchants like Widodo are making it easier for Indonesia to bring its small businesses — accounting for over 60% of national output — into the formal economy and within the tax office’s reach. Regional governments are among the earliest to benefit as their revenue rises 11% a year with QR helping businesses pay local taxes. 

The pandemic has accelerated a global shift to digital finance. In Indonesia, that move found an early champion in the central bank. 

In January 2020, well before Covid-19 spurred lockdowns across the world, Bank Indonesia required digital payment services to use standardised QR codes known as QRIS — pronounced as Chris — to ensure all banks and electronic wallets are interoperable. Customers can use their GoPay app to top-up their Bank Mandiri e-wallet or pay at a GoFood stall with their OVO account. 

“Indonesia was one of the few to act early and decisively by mandating the use of a unified QR payment system,” said Davids Tjhin, MD and partner at Boston Consulting Group in Jakarta. Standardisation made QR more convenient for consumers and cheaper for merchants, spurring faster adoption, he said. 

Indonesia is now a distant first place in South-East Asia both in the use of e-wallets and QR payments. The value of QR transactions has risen exponentially to hit 98.5 trillion rupiah (RM28.75 billion) last year and should gain further traction as the central bank doubles the transaction limit to 10 million rupiah. 

“Gone are the days when merchants need to have card terminals, which are costly,” said Budi Gandasoebrata, MD at GoTo Financial, which oversees the nation’s most widely-used e-wallet GoPay. “Today, with just a printer and an image file, they can start accepting payments in QR.” 

Indonesia’s young population and pervasive mobile-phone use helped QR become the perfect springboard for it to leave cash behind. That’s true at least in major cities. 

For the easternmost islands, central bank officers must brave seas and drive armoured trucks for days to distribute cash. This year, they will give out about three trillion rupiah of new bills to 85 islands, so people there can transact as old cash tends to tear or stain. Bank Indonesia expects broader QR use to reduce the need for their gruelling cash journeys. 

Facial Recognition 

Soon, you may not need a mobile phone to use QR. The central bank is testing facial recognition technology for places like schools where students aren’t allowed to carry phones. They can shop in the canteen using money in their bank accounts by showing their faces. 

Bank Indonesia is also setting its sights beyond the border. It’s doing a pilot run with Singapore and Thailand to integrate their QR payment systems, while Malaysia is set to follow. 

Singapore has linked its system with India and Malaysia. The Philippines seeks to quicken its QR rollout by requiring banks to adopt the national standard by July. 

Indonesia’s success will be a useful blueprint. South-East Asia needs to remain a “first mover” to “maintain a high degree of controllability” over the rapid expansion of digital finance, said incoming Bank Indonesia Deputy Governor Filianingsih Hendarta, who oversaw QRIS’s development. 

“The future of money, payments are undoubtedly digital,” she said. “There is no room for us to just sit and wait.” — Bloomberg 


  • This article first appeared in The Malaysian Reserve weekly print edition