Going Cashless in the “New Normal”: Challenges for Indonesia’s SMEs
Thu, 02 Jul 2020 || By Mira Ardhya Paramastri

The “New Normal” for Indonesia’s Economy

            Many decision-makers see the "New Normal" as a solution to solve the economic problems brought by the Covid-19 pandemic. This goes especially for Indonesia who experienced quite the blow from economic recession during the pandemic. Indonesia's GDP dropped the lowest since 2001, to that of 2.97% at the beginning of 2020.[i] At the beginning of the pandemic, there seems to be hope for "semi-lockdown" policy to succeed in the country. However, such favour has become less so as the end of the pandemic remains unclear. As of 22nd June, the number of cases in Indonesia per day only increased, with 46,845 confirmed cases, in which around 5% resulted in death.[ii] With the growing anxiety over the future of their economic well-being, some have decided to disobey the enacted health protocols, making the implementation of semi-lockdown policy ineffective for many parts of Indonesia.[iii] Not to mention many who thirst for social interactions have also decided to follow suit and ignore these protocols.[iv] Based on these concerns, the Indonesian government has decided to enact what is dubbed as the “New Normal.”

Wiku Adisasmito, the head of "Tim Pakar Gugus Tugas Percepatan Penanganan Covid-19" stated that the "New Normal" would be a condition which allows the conduct of normal activities during the Covid-19 pandemic, with the addition of health protocols to prevent the spreading of the virus, until a vaccine is found.[v] This means that the previously halted businesses during the semi-lockdown period will be expected to continue their business in the "new normal" way. However, how successful will that method be in assisting businesses in Indonesia, especially that of local SMEs? Many articles have already discussed how going digital and with it, going cashless, would help these SMEs strive. Many have discussed the challenges of going digital as well as the risks of going cashless if businesses decided to opt for it. However, there is also another issue that should be considered when one, especially policymakers, believes that going cashless is the solution for Indonesia's economy. How to make Indonesians successfully transition to cashless transactions? To even consider the solution for this, one must first identify the factors on why it is difficult for some Indonesians to go successfully "cashless," this article will explore more on this "why" factor. 


Challenges to go “Cashless”

            Indonesia’s economic condition is not the same after the semi-lockdown, the same could be said for its economic environment. Many businesses in Indonesia who have faced significant and massive losses have closed down during the period.[vi] Consumer behaviour has changed quite drastically during the semi-lockdown, and statistics have shown that the favour for digital and cashless transactions have gone up quite significantly in Indonesia.[vii] Previously the trend to go digital and cashless in Indonesia has been quite positive; however, there is a significant percentage that has been yet involved in this trend.[viii] The enactment of semi-lockdown and COVID-19 cases has indeed given Indonesian the push to go even more digitized and "cashless." Some of this change in behaviour is also expected to stay for some Indonesian as they are exposed to the convenience of "cashless transaction." However, not many Indonesian have the choice, and some even choose to not opt for that option due to some challenges. Identifying these challenges is essential to not only help Indonesian transition to "cashless," but also to assist policymakers in deciding the best ways to strategize cashless transactions for Indonesia's economy. 

Firstly, the challenge of the "digital divide." It is widely known that "digital divide" is a very prominent reason why some Indonesians are not within the "go digital" trend.[ix] Due to various reasons such as geographical location which limits access, lack of digital literacy, to lack of financial capabilities to own a gadget, many Indonesians are denied the opportunity to access digital and cashless services.[x] Trends have indeed shown that the number of people going digital has been increasing each year.[xi] However, the percentage which is not little and should be considered if going cashless is deemed as a solution in these times of pandemic.[xii] For some consumers, going cashless, or even owning a mobile phone, is a luxury they could not dream of possessing.[xiii] There are also issues related to network difficulty to access the internet, which makes it hard even to consider the use of the internet, moreover cashless, as a "new normal."

Secondly, while having access to digital and cashless services may be a problem, having such technology and access to it may not be enough for someone to choose the option of going cashless. This is related to the issue of accessing and possessing the means of "cashless transaction." There are many options and ways for someone to go for a cashless transaction. The most commonly known one is through card transaction.[xiv] To own a bank card, debit card, ATM card, or credit card, potential owners need to fulfil several criteria set by the bank.[xv] While these criteria may be different from a different bank and card types, one factor is the same: savings. Customers' capability to save is essential for banks, and often they use this as the minimum criteria for the possession of a bank card. This may seem simple for some people, especially those from the upper-middle to top class, who more or less have sufficient incomes to even consider the option to "save." However, for many lower-middle to lower class in Indonesia, such options may not be as easily available. In Indonesia, many still make less than their region and nation bare minimum standard of income.[xvi] This means that the majority of this percentage has little to no amount of income to consider savings. The money they gain that day is quickly spent to cover their daily necessities. Even if they happen to get a bonus, the amount may not be sufficient to consider opening up a bank account or owning a bank card, which is necessary for many cashless transactions. 

In this context, some may think services like GoPay and OVO could solve the problems of owning “savings.”[xvii][xviii] These services do not require the user to own savings, and there are many means to top up the balance in their service. However, there are still costs for using their services, which may not be cheap for some Indonesians. For some, rather than spending extra money on the service cost, it seems easier and cheaper to still go for physical, cash transactions. Similarly, it could be said for business owners. There are additional, and sometimes not cheap, costs to set up means for online transactions, such as, setting up a website and entering related agreements with cashless service providers. Some businesses may consider this as a worthy risk for long term investment; however, the need to secure an extra amount of money to start off going cashless may not be attractive for some businesses. This goes especially when they still have the option to conduct business through cash transactions. However, in the context of the new normal, many businesses may be forced to go beyond this comfort zone. Some may have no choice but to dive in the "cashless" business, even with the risk of losses due to increasing competition. Even so, it is still important to consider their worries over securing means to go cashless in this aspect as to ensure a smoother transition towards cashless transactions.


            Thirdly, even with the possession of the capabilities to go digital and "cashless." There is still another factor that should be considered when encouraging Indonesians to go cashless, the factor of "trust." From the consumers perspective, this is not only related to the trust they have for certain businesses or products; but this is also associated with the trust they have for the technology itself. For instance, many consumers in Indonesia, despite ordering a product online and having it sent to their homes, still at the end, pays using cash when the product arrives.[xix] Some may think that it is funny, to think that they would not opt for the more convenient way of doing cashless transactions when ordering their products online. However, this is reality. Many Indonesians are still sceptical about the guarantee for their ordered products, and these behaviours seem to prove it.[xx] Rather than facing the risk of disappointment and loss, consumers prefer to secure their product first and pay it in cash later. A similar concern could be said for some business owners, however in the opposite way. While consumers may want to secure their product first, business owners may want to secure their payment first. Why would they risk losing their products and service income for later payment? In this case, another solution may come as a better one for these businesses. Why should they risk losing customers from dissatisfaction and distrust over online upfront pay when they both could do a "fair" trusted physical transaction through cash? However, in the context of the new normal, consumer concern and preference may be one that affect the challenges to go cashless in Indonesia more as compared to businesses, as the condition of the New Normal seems to force businesses to go for cashless more than some consumers. Taking note of the growing community interest in going cashless, to save their businesses, they must take the courage to take up the risk of such concerns over cashless transactions.

            All in all, several conclusions could be made from this discussion. Firstly, the factors of digital divide, financial capabilities, as well as trust, are factors which challenge the transition of Indonesian going for cashless transactions. While trends have shown positive favour over cashless transactions in the country, it may still be a challenge for many Indonesian due to these factors. While, Covid-19 have forced some of these people to go cashless, beyond their comfort zones, which is a condition distinct to that before the outbreak happens, the issue of financial capabilities is still present and should not be taken lightly. This factor could also be worse when business owners, as well as consumers, fail to adapt to the business environment during the New Normal, including the consideration for going cashless. Another concern is, despite being "forced" in an environment which limits physical contacts, both businesses and consumers do not adhere to such force, choosing to disobey health-related protocols. Such may happen when their condition and their trust towards the benefits of physical transactions, or business transactions before Covid-19, is more during the New Normal, rather than limiting contacts, with the concern over the drop of profit, which include that of opting for digital transactions.

Author: Mira Ardhya Pramastri
Editor: Amelinda Pandu Kusumaningtyas

Read more articles written by Mira Ardhya Pramastri



[i] Trading Economics. (2020). Indonesia GDP Growth. Trading Economics (Online). Available at: https://tradingeconomics.com/indonesia/gdp-growth

[ii] Kompas. (2020). Data COVID-19 di Indonesia. Kompas (Online). Available at: https://www.kompas.com/covid-19

[iii] Kompas. (2020). Pelanggaran PSBB. Kompas (Online). Available at: https://www.kompas.com/tag/Pelanggaran-PSBB

[iv] Ibid.

[v] Bramasta, D.B. (2020). Mengenal Apa Itu New Normal di Tengah Pandemi Corona. Kompas (Online). Available at: https://www.kompas.com/tren/read/2020/05/20/063100865/mengenal-apa-itu-new-normal-di-tengah-pandemi-corona-

[vi] Subakti, H.A. (2020). Teten Ungkap Bisnis UMKM yang Bertahan dari Hantaman Corona. CNBC Indonesia (Online). Available at: https://www.cnbcindonesia.com/news/20200429205658-4-155383/teten-ungkap-bisnis-umkm-yang-bertahan-dari-hantaman-corona

[vii] Safitri, K. (2020). Transaksi Digital Melonjak 64,48 Persen Saat PSBB. Kompas (Online). Available at: https://money.kompas.com/read/2020/06/18/180000126/transaksi-digital-melonjak-64-48-persen-saat-psbb

[viii] We Are Social. (2019). Digital 2019: Indonesia (Online). Available at: https://datareportal.com/reports/digital-2019-indonesia [Accessed on May, 8th 2020].

[ix] Hadi, A. (2020). Bridging Indonesia’s Digital Divide: Rural-Urban Linkages?. Jurnal Ilmu Sosial dan Ilmu Politik, 22(1), pp. 17-33. Available at: https://jurnal.ugm.ac.id/jsp/article/view/31835

[x] Ibid.

[xi] We Are Social. (2020). Digital 2020: Indonesia (Online). Available at: https://datareportal.com/reports/digital-2020-indonesia [Accessed on May, 8th 2020].

[xii] Ibid.

[xiii] Hadi, A. (2020). Bridging Indonesia’s Digital Divide: Rural-Urban Linkages?. Jurnal Ilmu Sosial dan Ilmu Politik, 22(1), pp. 17-33. Available at: https://jurnal.ugm.ac.id/jsp/article/view/31835

[xiv] J.P Morgan. (2019).  E-commerce Payments Trends: Indonesia. J.P Morgan (Online). Available at: https://www.jpmorgan.com/merchant-services/insights/reports/indonesia

[xv] Ibid.

[xvi] The World Bank. The World Bank in Indonesia. World Bank (Online). Available at: https://www.worldbank.org/en/country/indonesia/overview

[xvii] GOJEK. Cara Top-up. Gojek (Online). Available at: https://www.gojek.com/gopay/cara-top-up/

[xviii] OVO. How to Top Up. OVO (Online). Available at: https://www.ovo.id/howtotopup

[xix] Hadi, A. (2020). Bridging Indonesia’s Digital Divide: Rural-Urban Linkages?. Jurnal Ilmu Sosial dan Ilmu Politik, 22(1), pp. 17-33. Available at: https://jurnal.ugm.ac.id/jsp/article/view/31835

[xx] Ibid.