Future of digital money

The use of e-money is inevitably going to expand in Indonesia. The traditional rupiah has been useful for more than five decades since Bank Indonesia issued its first notes in 1952.

Nowadays, the rupiah is less popular and consumers are turning to credit cards, debit cards and, more recently, e-money.

What is e-money? E-Money (also known as e-cash, e-currency, digital money, digital cash or digital currency) refers to money recorded electronically on a card.

According to Banks for International Settlement, e-money includes both prepaid cards, also called electronic purses, and prepaid software products, also called digital cash, which use computer networks, like the Internet.

These products differ from so-called access products that allow consumers to electronically manage their funds, for example, Internet banking.

E-money is a card with a magnetic strip with a stored valued of funds, which is either predetermined or established by the consumer when the card is purchased from the issuer. The value of each transaction is deducted from the card until it reaches zero. Some cards can be recharged with money at special terminals, such as ATMs, and are reusable.

E-money undoubtedly provides many benefits to its users, such as convenience, privacy, increased efficiency and possibly lower transaction fees than credit cards offer, yet the use of e-money has been relatively low-scale in many countries.

Some rare successes in Asia have been Hong Kong's Octopus card, Singapore's EZLink, and Japan's Edy and Suica cards, which are all using the same technology from Sony Corp.'s FeliCa.

The Octopus card system, originally launched in 1997 for transit payments, has come into wide use in Hong Kong in convenience stores, supermarkets, fast food restaurants, parking meters, car parks and other point-of-sale outlets, such as service stations and vending machines.

EZLink was established in 2001 for the public transportation system in Singapore and has since expanded and gained more acceptance at McDonald's, fast food centers, supermarkets and even vending machines.

Edy and Suica cards were both launched in 2001. While a Suica card is a must-have for Tokyo's 10 million commuters, Edy actually leads the e-money market in terms of the number of transactions made, in part because it can be used in a far greater number of retailers.

Is e-money available in Indonesia? The use of e-money in the form of prepaid cards in Indonesia has only recently become popular.

In response to increasing demand for e-money products, Bank Indonesia launched an initiative to create a cashless society in 2006.

The initiative aimed to promote the creation of a secure, efficient and reliable mechanism for the public.

In 2007, Telkomsel was granted a license from Bank Indonesia to market its e-money products, namely T-Cash, as the first mobile e-money system in Indonesia. It wasn't particularly popular.

Will e-money be a success story in Indonesia? Following its success in neighboring countries, e-money in Indonesia could potentially be successful. Various outlets, such as convenient stores and road tolls, would have to be on board to make the product attractive to consumers.

Jakarta now has an efficient busway system and several toll road corridors where an e-money system could be implemented.

Without a doubt, this project needs an enormous amount of investment. Nonetheless, it would provide more benefits for both consumers and issuers, as long as it is more than just a card to be used at convenience stores. [By Agus Firmanysah]

Source: TheJakartaPost