HSBC Bank is bringing digital payments to the Fast-Moving Consumer Goods (FMCG) industry in an effort to create an ecosystem that will make transactions safer and easier.
At the Mobile Collections Solution Workshop in April, HSBC invited FMCG distributors, the International Finance Corporation (IFC), Indosat and e-MITRA to discuss making the shift from cash-based payments to digital payments.
“We get feedback from customers that they want to move away from physical cash collection – and that’s one of the reasons why we focus on mobile collections,” explained Andrew Davis, Head of HSBC Innovation and Client Solutions.
The HSBC program, called the “Mobile Collections Solution,” is engineered for the FMCG sector. The live system test was completed in Indonesia in 2014 and the program is scheduled to launch in the second half of 2015.
The payment service is currently based on the use of a digital wallet product from Indosat called Dompetku. In the future, HSBC plans to offer enhancements and additional funding capabilities using bank transfer or credit card top-up.
The digital payment service is expected to reduce fraud, eliminate risk of theft and increase sales optimisation. HSBC will also provide real-time reports on the web portal for the distributors.
One of the program’s shortcomings, pointed out by distributors at the workshop, is the maximum balance set for Digital Financial Services (DFS) in Indonesia. The regulation from Bank Indonesia states that the maximum balance is IDR 5 million per account, while the maximum transaction is IDR 20 million per month. This means that as of right now, the money collection service can only be used by small shops for small transactions.
The Indosat team explained to distributors that according to their experience, the regulation usually follows and reflects the needs of DFS users; if Bank Indonesia needs to increase the maximum balance to enable larger transactions, then surely they will do so.
Insights and Research on Digital Payments
Following HSBC and Indosat, Jennifer Jarvis from IFC presented findings from a survey of 800 traditional retailers across eight cities in Indonesia.
“A lot of traditional retailers don’t have a detailed record of their transactions. They usually rely on the distributors’ staff to recommend what and how much to order,” explained Jennifer. “We found that 39 percent of traditional retailers are interested in using digital payments if it can solve their problems. The research also shows that younger retailers are more interested in digital payments.”
Jennifer concluded that a new industry approach is warranted since retailers face many challenges in adopting digital payments.
“Education is the key,” she stressed.
Afterwards, Eky Amrullah from e-MITRA shared his experience in motivating retailers to adopt DFS. To reach traditional retailers, he said, the DFS needs to be simple and have no hidden cost. He cited trust as a very crucial element for the retailers.
“To engage them, first we need to let them experience the service. Then we need to share an additional value preposition. One of the most important things is to develop a digital ecosystem and make sure that the DFS works in various outlets,” Eky explained.
Eky also said that there are several challenges in creating a DFS ecosystem for traditional retailers, like deciding on a business model that works best, improving marketing support, and ensuring that the telecommunication network is reliable.
“The unbanked and the traditional retailers are very interested in using DFS since it can make their lives easier –but we need to show them that DFS is reliable and very easy to use.”