Will Google Wallet Succeed in Indonesia?

A few days ago, Google launched its Google Wallet which is a mobile app that enable cellphones to act just like a credit card to consumer. With an integrated NFC chip pre-installed (currently only in Google's own Nexus S), consumer could just wave their phone in front of a reader in order to make payments. According to Stephanie Tilenius, VP of Commerce and Payments at Google, it envisions the cellphone to act as a personal financial hub for coupons, merchant loyalty points, payments and receipts.

There's no doubt that this will change how consumer buy things online and offline, this will impact the world and Indonesia as one of the fastest growing economy in SEA is not an exception. Despite the low credit card penetration in the country, Google Wallet could still impact the credit card growth in Indonesia, if it plays nice.

But still, the question is : can Google Wallet help leverage Indonesia's ecommerce scene?

Now, there's 4 things I need to emphasize about Google Wallet :

1. Smartphones : it's a mobile app with embedded NFC chip on the device.
2. Location based: Google will give you deals, promo and offers based on your location data as tracked by the smartphone's GPS system.
3. Security : If  you ever lost your phone, Google Wallet have a security mechanism that will prevent someone else from doing a shopping spree using your phone.
4. Credit cards : the mobile app contains your credit card information, charged automatically.

And of course, all 4 factors are essential and already working in countries like US, some countries in Latin America, Europe etc, this would probably be Google Wallet's key to succeeding in further developed countries. One thing missing, and it won't work.

Indonesia is a huge mobile market, cellphones are an extension of the arm, one friend said. The behavior of taking cellphone as a personal connection tool has been going mainstream in Indonesia's urban cities. This behavior is what makes Indonesia one of the hottest country for mobile/internet market, leaving foreign tech companies curious about the country which is almost non-existent if it weren't for the uniquity of Facebook and Twitter.

Smartphones, check.

Location-based services now gaining popularity in Indonesia with local services like Koprol, Urbanesia, PriceArea going mainstream and foreign services such as Foursquare, Gowalla, SCVNGR etc. Lots of e-commerce companies also start to embed location-based features on their services, pushing location-based and mobile technology altogether. With such benefit, no one doubt about the success of location-based services in Indonesia in near future.

Location based, check.

Security is probably a bit critical, most ecommerce sites in Indonesia having a hard time convincing consumer about how secure their system is. It's an on-going process but it's only a matter of time before people start believing in technology as a tool to help them do things effectively and efficiently. Probably in 2-3 years, the trust factor will be less and less relevant as obstacle for online services in Indonesia. This can also be strengthen by Google's security features in the application, it's easy for companies like Google and handset manufacturer to add security layers, for example biometrics security (face, fingerprint recognition, etc)

Security, check.

As we all know, in Indonesia the credit card penetration although increasing every year, is still very low.  This is the missing key for Google Wallet to be successful in Indonesia, despite the strong effort for banks to make people use credit cards. The fear of overusing credit card is the most obvious reason for Indonesian people not to use credit card and prefer debit cards instead.

If there's one factor that's preventing Google Wallet to be successful in Indonesia is credit card ownership. Will this change? It probably will. According to Indonesian Central Bank, "Indonesian credit card market is still very potential and the growth possibility are very much open".

The data recorded from the Directorate of Bank Payment Systems noted that according to Central Bureau of Statistics (BPS), there are approximately 104 million potential new card holder with total numbers of credit card at year end 2010 is 13.4 million cards. - source

Personally, I'm optimistic that credit card ownership in Indonesia will grow significantly as the economy keep growing throughout 3-5 years from now. Just in time as the ecommerce and behavior of buying online will dominate the urban market, just in time as the "internet generation" grow to a level where they have the power to buy.

This way, Google Wallet have a big chance to enter the Indonesian market and probably have 3-5 years to build the foundation in Indonesia while waiting the market and landscape to grow mature for ecommerce.

image credit : butterscotch