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Over-the-Counter (Retail outlet) Payments in Indonesia

winnie.mina
Last updated: January 26, 2023
 •  4 min read

Over the Counter (Retail outlet) Payments in Indonesia

Over-the-counter payments are becoming increasingly popular in Indonesia, especially among rural and low-income consumers who do not have bank accounts or access to them. This is because these payments are usually carried out at minimarkets, which have mushroomed all over Indonesia–even in the rural areas–over the past years, and have now become ubiquitous.

Accepting over-the-counter payments can help businesses build greater trust with their customers and increase sales due to greater convenience. 

Large unbanked population gives rise to opportunities for over-the-counter payments

unbanked population in indonesia

Indonesia is a vast and populous country, with an adult population of 181 million people. However, many Indonesians are not using banks or mobile payments. The country has one of the lowest rates of banked citizens in Southeast Asia, with the percentage of the unbanked and underbanked population at just 51% and 26% respectively.

“Unbanked” refers to individuals or households that do not have any type of bank account, including checking and savings accounts. Unbanked individuals are typically not able to access traditional financial services and may have to rely on alternative financial services, such as check cashing or payday loans. Some even rely on “bank keliling” (literally meaning “roving bank”), which are money lenders (usually unregistered and considered loan sharks) that go to door-to-door to provide loans, usually to the lower-middle class.

Meanwhile, “Underbanked” refers to individuals or households that have a bank account but may not have sufficient access to certain traditional financial products or services, such as credit cards or loans, or to meet their needs. As such, they still rely on alternative financial services, such as check cashing or payday loans, for some of their financial needs.

This large unbanked population is a massive untapped market for online retailers that have so far only accepted online payments through banks and e-wallets. Over-the-counter (OTC) payments at retail outlets can fill that gap, as retailers serve as a trusted social institution that people can access without having a bank account. 

In fact, retailers are ubiquitous in Indonesia. Up until 2020, there were more than 34,000 minimarket outlets in Indonesia. Not only that, based on a JakPat survey, 85.9% Indonesian respondents prefer to shop for groceries traditionally in conventional stores, including shopping in a minimarket (retail).

What are over-the-counter (OTC) payments?

OTC payments are a popular way to pay bills and make other transactions in Indonesia. OTC payments are made at retail outlets, like convenience stores, with the use of an ID card. Some examples of ubiquitous convenience stores that accept OTC payments are Indomaret, Alfamart, Alfamidi, and Dandan.

What kind of payments are usually made at retail outlets?

Customers can make various types of payment transactions at retail outlets. Here are some common examples:

  • Voucher purchases: Customers can purchase various types of vouchers at retail outlets, including internet vouchers, phone credit, games, and applications such as the Google Play Store and more.
  • Bill payments: Customers can make payment for multi-finance bills, credit cards, water bills, telephone, internet, insurance, and many more.
  • Online payment transactions: Customers can make cash payments from their online transactions easily through the cashiers at retail outlets.
  • Top up e-wallet balance: Customers can top up e-wallet balances both for their digital accounts and cards.
  • Ticket Purchases: Ordering and purchasing tickets such as trains, planes, buses, ships, theme parks, and even concert tickets can also be done easily through retail outlets.

How do OTC payments work in Indonesia?

Here’s how over the counter (Retail outlet) payments work when a customer wants to pay for something they buy online:

  1. The customer places an order at an online store and chooses “retail outlet payment”, and this provides them with an order number/unique code
  2. The customer then goes to a retail outlet and presents their order number to the retailer.
  3. The customer pays the amount in cash + administration fee (but for some merchants, there may be no additional fee)
  4. The customer then receives the payment receipt and transaction is completed

Why are OTC payments popular amongst Indonesian consumers?

The advantages of paying over the counter include not having to wait in long lines at a bank or ATM machine and, in the case of withdrawals or loans, being able to access their cash quickly.

Furthermore, payments made at retailers and other retail outlets are extremely popular among rural and low-income consumers because retail outlets can be found easily in Indonesia, even in rural areas usually not served by banks. 

Therefore, businesses that accept OTC payments can look forward to  increased foot traffic and fewer complaints about payment options when compared with cash-only businesses.

Benefits to businesses accepting OTC payments

Businesses that accept over-the-counter (OTC) payments at retail outlets benefit in several ways:

  • Convenience for customers: OTC payments are convenient for customers, as they do not have to worry about online security or the availability of electronic payment methods. Customers can simply present the payment to the cashier or salesperson at the retail outlet and complete the transaction. At the same time, it’s easy for businesses to provide this added convenience, as they do not need to have any special equipment or infrastructure.
  • Increased sales: By accepting OTC payments, businesses can potentially increase their sales, as they can attract customers who prefer to pay in cash.
  • Reduced fraud risk: OTC payments can also help reduce the risk of fraud, as transactions are conducted in person and can be verified by the cashier or salesperson.
  • Customer loyalty: By offering a variety of payment options, businesses can show that they value the convenience and preferences of their customers, which can help increase customer loyalty.

Easy way to offer OTC payments

Many companies are hesitant about accepting OTC as a form of payment due to the cost associated with implementing such systems. However, this doesn’t have to be the case. 

In today’s landscape, you can integrate a secure OTC solution into your mobile app or website without a high upfront cost. For example, by integrating with Xendit, you can offer 38+ payment methods at one go, and you can activate OTC payments with just a few clicks. Create your free account with Xendit now!

Get started with Xendit

Learn more about payments in Indonesia

Understanding the opportunities and challenges of the local market is key to staging an effective entrance.

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