In Indonesia, operators choose interoperability and collaboration

On May 15th 2013, the three major mobile operators in Indonesia: Telkomsel, Indosat and XL jointly went live with a huge milestone in the mobile money industry. It was an update to enable customers of each of their mobile money services to send money, in real-time, to customers of the other network’s mobile money services, directly crediting the recipient’s account.

In most other countries where mobile money is strong, e.g. East Africa, when you send money to someone at another network, that money can only be cashed out at the sending service’s agent network. So instead of potentially triggering further electronic transactions, sending money “off-net” in their case means that no further electronic transactions will happen. With this recent move, Indonesia becomes the first large market to go live with an interoperable solution, a solution that enables more transactions to take place even after off-net transfers, and creates one connected environment of mobile money in the market.

We had a chance to speak with Yessie Yosetya, Head of XL Tunai, and she explains further: Prior to this, each operator only allowed mobile money transfers within its operator, e.g. XL Tunai to XL Tunai only, or Telkomsel Tcash to Telkomsel Tcash, or Indosat Dompetku to Indosat Dompetku. After 15th of May, subscriber from XL can transfer their m-money to either Telkomsel or Indosat subscriber; and vice versa.

In a previous post, we discussed the importance of industry collaboration among mobile money providers in their market. In Indonesia the operators started regular industry discussions among themselves in December last year, and they have been meeting weekly since then.  During this time, a common SOP (Standard Operating Procedure) was agreed among all operators for handling customer care and fraud issues across the operators.

The technical development to enable the platforms to talk to each other took about four months. The chosen technical solution was to establish secure direct connections and communicate through a web service, using WSDL, with each platform. It was decidedthat the funds will be settled bilaterally on a regular basis, starting monthly, but will be   adjusted depending on the volumes that will be transferred. 

Yessie explains why this is happening in Indonesia before other markets: Each of the operators in Indonesia have been trying on its own to educate and drive the adoption in the market. It is in everybody’s interest to move the market forward and we see P2P interconnection as an enabler for this. Our common goal of m-money interconnection is to drive adoption, using the analogy of sky-rocketing adoption of cellular service after SMS was opened for off-net transactions. We calculate that this will increase up to 20% of P2P transactions.

Network theory tells us that, in theory, this number could be much higher as transactions could grow exponentially with the increased number of nodes and connections possible within the system. This initiative shows us that Telkomsel, Indosat and XL are all committed to making mobile money succeed in Indonesia. This commitment together with the recently launched enabling regulation will hopefully help propel Indonesia’s mobile money industry to a rapid growth.

Photo: By smagdali, via Flickr.

Join the Conversation (9 comments)

  • Michael Joyce says:

    I think what’s also important to note in this market is the context of the banks. Right now, telcos can operate e-money services, but banks cannot use agents except as a small-scale pilot. This is due to change once the pilots are completed and new regulation is released.
    Bank accounts in Indonesia are highly interoperable, with well established inter-bank clearing and RTGS (Real Time Gross Settlement). The majority of ATM transactions are actually payments, not cash withdrawals, indicating that there is a demand for self-service electronic payments Opening up interoperable services for telco e-money is a smart pre-emptive strike before the banks start to enter the mobile space.
    Either way, the winners will be the consumers, with a broader range of competitive services to choose from.

  • Thanks a lot Gunnar for the post which is indeed a first in interconnecting platforms. I understood that, for the moment, the clients can’t cash out on any of these networks. This may constitute a limit in Mobile Money expansion. Could you please confirm and share views !? Thanks a lot and warm regards

  • Alit Asmara Jaya says:

    In my personal view the such interoperability is one of the way how to increase P2P for the 3 operators which have been in the market for quite so so long. The most importance thing is, the acceptance of the people in Indonesia to use mobile money provided by the telcos in stead of banks.

  • Great Initiative and would have far fetching results for the entire industry. Mobile Money transfer has always been a challenge across developing countries and this could well prove as a test bed for many other countries like India.

    Looking forward to updated report on the adaptability

  • Great initiative in Indonesia and thanks Gunnar for this post. It is interesting to see that it is possible to build a business model and the future will tell us about its sustainability.
    However it seems to be a partial interoperability since mCoin is not part of this strategic alliance.
    Furthermore, the context being different from one country to another, one may experience different models of interoperability implementation.
    Thank you in advance for sharing the future evolution and impact analysis on MMS.

  • Gunnar Camner says:

    Great to see comments on this exciting development in Indonesia.

    @Michael Thanks for the industry insight, and thanks for reading. A strong national payments system will help mobile money become more efficient as well. Like you say, the consumer will be the winner. Would you say that the services from banks and operators will be mostly complimentary to each other?

    @Alit I agree – the main challenge for operators will be to ensure mobile money uptake in the market.

    @Philippe There has been a change in regulation so that customers are now able to cash-out at agents. This makes the customer proposition much more attractive to take up and use mobile money.

  • Tukashaba Saul says:

    Thanks a lot Gunnar for the post. This is a great initiative. I would want to know how this works out at at agent points. Can a customer cash in/ cash out at other network’s mobile money agent?

  • Gunnar Camner says:

    Hi Tukashaba,

    The operators are each investing in their own distribution and customer acquisition channels.

    I think sharing this channel would be a new strategic conversation. It might happen in the future, but I think it depends on how the market and market dynamics evolve. Right now it’s good that we see a willingness to invest.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.