May 14, 2024

Unlocking Revenue Potential In Indonesia’s Credit Card Boom

Unlocking Revenue Potential In Indonesia’s Credit Card Boom

The Indonesian credit card market, historically overlooked, is poised for a significant upturn in the coming years. Despite the growing popularity of Buy Now, Pay Later (BNPL) schemes, which have filled a vital lending gap, credit cards offer distinct advantages that have secured their place in Indonesia’s financial ecosystem. 


With a population of 273.8 million, even a modest penetration rate presents a substantial market opportunity. Credit cards provide higher credit limits and more extensive rewards than BNPL services, which often need help with profitability. Moreover, the Indonesian government’s interest in establishing a domestic credit card network underscores the sector’s potential and regulatory support.


This burgeoning interest is catalyzed by data from Bank Indonesia, which reveals a robust recovery in credit card usage post-pandemic. In 2022, credit card transactions soared to Rp 323.6 trillion ($24.1 billion), a 32% increase from the previous year. The government’s proactive stance, combined with significant foreign investments, notably from Japanese institutions like Orico in collaboration with Honest Financial Technologies, highlights a strategic shift towards revitalizing and expanding the credit card infrastructure. 


The Growing Credit Card Boom in Indonesia


The appeal of credit cards in Indonesia is multifaceted. They not only offer larger credit limits and a variety of rewards but also have the backing of established financial institutions, unlike their BNPL counterparts, which frequently face profitability challenges. This sustainability is crucial in a market where economic swings can impact consumer finance. Furthermore, the low credit card penetration rate, currently at just 5%, compared to regional peers like Thailand and Malaysia at 35% and 30%, respectively, indicates significant room for growth. This “low-hanging fruit” represents a ripe opportunity for new entrants and existing players to expand their customer base.


Government Initiatives and Domestic Network Expansion


The Indonesian government is making significant strides to bolster its domestic payments infrastructure by developing a government-led domestic card network. This ambitious initiative aims to reduce Indonesia’s dependency on foreign credit card giants such as Visa and Mastercard, which currently command about 90% of the market. By fostering a homegrown network, the government seeks to enhance national financial sovereignty and inject more competition into the market, potentially driving down costs and increasing innovation.


Market Opportunities and Challenges


However, the Indonesian market is not without challenges. Infrastructure development remains inadequate, particularly regarding point-of-sale (POS) terminals. With only 7,264 POS terminals per 1 million inhabitants as of 2023, Indonesia must catch up to its regional peers, underscoring a significant barrier to broader credit card adoption. The high costs associated with installing and maintaining these terminals pose additional hurdles, particularly for smaller merchants who may find the investment prohibitive.


Moreover, the consumer preference for cash transactions, which accounts for 76% of payments in 2022, further complicates the transition to digital payments. While this preference represents a challenge, it also signifies a considerable opportunity for credit card companies and payment service providers to innovate and educate the market about the benefits of digital payments.


The Role of Technology in Market Transformation


The digital transformation of Indonesia’s financial sector is dramatically influencing credit card usage and acceptance. As the country embraces technological advancements, the credit card market is increasingly seen as a financial tool and a gateway to enhanced consumer experiences and operational efficiencies. Innovative technologies are pivotal in transitioning from traditional payment methods to more secure, convenient, and integrated financial services.


Artificial Intelligence (AI) and machine learning are also becoming integral in customizing consumer experiences and improving risk management. Banks and credit card companies leverage AI to analyze spending patterns, predict consumer behavior, and offer personalized product recommendations. This enhances customer satisfaction and helps identify fraudulent transactions more swiftly, thereby reducing losses.


Leveraging Advanced AI Analytics to Transform Credit Risk Assessment in Indonesia


At 1datapipe, we believe in empowering financial institutions with precise, reliable, and actionable insights to navigate Indonesia’s dynamic financial landscape. Our platform offers five unique scores, providing comprehensive insights into the customer journey for banks and fintech companies.


1. Secure ID & Fraud Score


This score combats evolving fraud threats through advanced profile resolution techniques. It scrutinizes digital footprints, including web screening and IP risk checks, to detect synthetic ID creation and account takeovers, enhancing security.


2. Income Stability Score


Crucial for financial decisions related to loans, insurance, and credit card issuance, this score provides an accurate assessment of a customer’s income reliability. It evaluates income attributes such as consistency, frequency, and trends, offering detailed insights that support rapid and well-informed decision-making.


3. Financial Inclusion Trust Score


Expanding the view of creditworthiness, this score integrates traditional and alternative data, leveraging an AI-powered clustering algorithm to produce a robust credit risk assessment for over 95% of the Indonesian population. By identifying underbanked consumer profiles, it enables financial institutions to serve underserved populations, expand customer reach, and unlock more revenue by broadening access to essential financial services.


4. GeoLifestyle Score


By analyzing geographical and behavioral data, this score provides insights into customer preferences and patterns, enabling personalized credit offerings. These tailored insights help drive revenue by aligning products with individual lifestyles and enhancing customer engagement.


As Indonesia enters an exciting new phase of economic growth, we invite banks, fintech companies, and other financial institutions to explore how our AI-powered solutions can benefit your operations. To discover more about our technology and how it can be integrated into your business strategies, visit us at or contact our team for a detailed consultation and demonstration.