Credit cards are one of the most popular methods of payments worldwide. They are a convenient and secure form of payment that offers a variety of benefits to consumers and businesses alike.
In this article, we will discuss more about the credit cards landscape specific to Indonesia, key benefits to businesses and consumers, and how businesses can easily offer this payment method to their customers.
What are credit cards and how do they work?
Credit cards are a type of financial product, issued by banks or financial institutions, that allows consumers to make purchases on credit, instead of paying for them upfront.
They work by issuing a line of credit to the cardholder, which can be used to make purchases at participating merchants such as restaurants, hotels, online stores, and much more. The cardholder is then responsible for paying back the amount charged to their credit card, plus any interest, at a later date.
However, most credit cards only charge interest if the bill is not paid in full each month.
Credit card payments in Indonesia
On the whole, credit card penetration in Indonesia is one of the lowest in the region at just 6%.
There are around 16.5 million credit cards in Indonesia in 2021, having decreased by 3% following the Covid-19 crisis in 2020. There were fewer credit card transactions in Indonesia following Covid-19, but the value of those transactions have increased.
To boost Indonesia’s economic recovery from the Covid-19 crisis, the central bank, Bank Indonesia (BI), lowered the maximum limit of credit card interest rate from 2% to 1.75% per month starting July 2021.
There are a few different types of credit cards available in Indonesia:
- Standard credit cards: These are the most basic type of credit card and are suitable for people with good credit histories
- Premium credit cards: These often charge higher annual feeds, but offer more benefits, such as concierge services and airport lounge access.
- Co-branded credit cards: These are credit cards that are affiliated with a specific brand or company, such as an airline or hotel chain. These credit cards often offer additional perks and benefits to users when they make purchases with the affiliated brand.
Requirements for obtaining a credit card in Indonesia
In order to obtain a credit card in Indonesia, applicants would usually need to fulfill a few criteria:
- Age: Most credit card companies only offer credit cards for applicants above a certain minimum age, in most cases 21 years or above.
- Income: Usually, the bank or credit card provider will request proof of income, such as payslips or a letter of employment from the applicant’s employer. The income level required varies depending on the institution and the credit card being applied for.
- Credit history: Credit card providers usually check an applicant’s credit history before providing them with credit cards. If the applicant has a good credit history (i.e. always making payments on time), it will be easier for them to get a credit card.
- Supporting documents: Credit card providers usually request various supporting documents such as KTP (Indonesian ID), NPWP (Indonesian tax identification number), proof of address, etc.
The approval process usually takes a few weeks. If the application is approved, the credit card will usually be mailed to the applicant.
Benefits of credit cards for consumers
For consumers, credit cards offer the ability to make purchases on credit, which can be particularly useful for large or unexpected expenses. Credit cards also often offer rewards programs, such as cashback or points that can be redeemed for merchandise or travel. There are also some credit cards offer benefits such as travel insurance, rental car insurance, and extended warranties on purchases made with the card.
Business benefits of accepting credit card payments
There are several ways businesses can benefit by accepting credit card payments.
- Speed and accuracy
Credit card transactions are often faster and more efficient than cash transactions, as there is no need to count cash and provide change. This way, your business can not only save time but also avoid human errors that can erode your profits.
- Security
Credit card payments are also more secure than cash payments, which can be more prone to theft. With today’s technology, credit card transactions are often protected by AI-powered technology that helps to identify potential credit card frauds and can even act to prevent the completion of transactions assessed to have a high likelihood of fraud.
- Attracting more customers
Credit card payments can help businesses attract a wider range of customers, including customers who don’t like to handle or carry cash, especially for higher-value transactions. There are also customers who want to earn cashback and points from their purchases, or even customers making impulse purchases without having planned for the expense in terms of availability of cash.
- Go international
While credit card penetration in Indonesia is relatively low, credit cards are highly popular, especially in many countries with higher purchasing power. Singapore, for example, has a credit card penetration rate of a whopping 85%. By enabling credit card payments, you can easily expand your customer base of your online business beyond Indonesia, and start selling to customers all over the world. If you are in the hospitality business, then it’s vital to enable credit card payments, since much of your customer base is likely to come from overseas.
How businesses can easily accept credit card payments in Indonesia
It’s easy to start offering credit card payments as an option to your customers. You don’t need to put in a lot of time and effort, and there is also no upfront cost. The cost usually only comes in when transactions are processed.
One of the easiest ways businesses can accept credit cards is by integrating with a payment gateway. Payment gateways such as Xendit have already done the work to integrate with a wide range of payment methods, so you can access various payment methods easily through them. Through one simple integration with Xendit, for example, your company will be able to offer over 38 payment methods at one go, including credit card payments.
Given the many benefits of offering credit card payments, businesses are missing out if they are not yet accepting credit card payments. Start offering your customers the option of making payment through credit cards by creating your free account with Xendit now.
