1. Startup

XL Axiata to Shut Down XL Tunai E-Money Service

The top-up balance service has been shut down, waiting for approval from Bank Indonesia

XL Axiata (XL) cellular operator is to shut down XL Tunai e-money service after eight years of operation. This decision was taken as the difficulty to grow amid intense competition with other digital wallet players.

Regarding the shutdown, XL has conducted socialization with its customers via SMS. The written statement: "Dear Customer, your XL Tunai service will be terminated on 28/02/2020 due to your balance at Rp 0".

Furthermore, another SMS stated: "Dear Customer, we are to re-inform you that XL Tunai-in balance / cash-in has been closed as of 12/02/2020. Your balance can still be used for transactions through *808#".

A familiar source told DailySocial, XL Axiata's CEO Dian Siswarini said that the service termination referred to the termination for balance top-up or cash in.

"Termination balance top-up is to stop money circulation. We really plan to shut down XL Tunai, but it can't just be, because we have to get approval from Bank Indonesia (BI) as the issuer," Dian said.

There are no further details regarding this shutdown. Dian said that she was still discussing with BI regarding the mechanism of closing its services.

XL Tunai was launched in 2012 and currently has 2 million users. Just like other e-money services, XL Tunai can be used to send and receive funds, pay bills, and buy tickets.

Challenging not to be agnostic

One of the biggest challenges for operators in the e-money business today was to shift banking domination. It's getting harder when GoPay, OVO, and solutions from digital services increasingly exist.

Operators are considered to have failed to boost the users' growth and e-money transactions due to a lack of merchant inclusiveness and ecosystem. The market share is limited to only customers.

Of the total 56 million XL customers, only 2 million are using XL Tunai. Telkomsel, with the largest customer base of 167 million, only acquired 20 million users - only half of them are active in transactions.

It's a strategic step when T-cash decided to become an agnostic e-money platform at the end of 2018. It's intended to become a platform that is free to use by anyone, without having to be a Telkomsel customer. T-cash and server-based e-money services run by state-owned banks have now merged into LinkAja.

Based on the 2019 Fintech Report, GoPay is currently the most used digital wallet of 83.3 percent, followed by OVO (81.4%), DANA (68.2%), and LinkAja (53%).

The fall of cellular operator's digital business

Since 2018, XL Tunai operations have been transferred to its parent company, Axiata Digital Services. According to the latest news, the transfer was made so that XL could focus on its main business as telecommunications provider.

This is actually a strategy to remain efficient as a group, especially after XL failed to build Elevenia as an e-commerce joint venture with SK Planet. In the end, all of the blue operators' digital businesses were left entirely to Axiata Group.

"We do not plan to substitute XL Tunai with a similar new service. The new plan [digital business] is actually there, but now it is handled in groups by the holding company," he explained.

XL is not the only one failed to build a digital business. Indosat Ooredoo experienced the same failure. The company launched Dompetku to be merged into PayPro in the midst of 2017, also closed the Cipika marketplace because it did not want to keep burning money.

Reflecting on the issue above, telecommunications operators actually have a great opportunity to create new revenue from digital business. Operators have a large customer base and extensive network infrastructure. Its position as a telecommunications operator is advantageous because it must stay ahead of technological developments.

On the other hand, operators should move quickly in the face of competition with Over-The-Top (OTT) players. The growth of the telecommunications industry continues to fall and the cellular business is no longer expected. In other words, they must maintain profitability while continuing to build networks.

Although starting to refocus on the cellular as its core business, telecommunications operators still need to prepare themselves for the next 5-10 years to face the digitalization era.

What should be sought together is how the telecommunications industry finds the right business models and strategies in running digital businesses in the future, including finding capable talents to develop digital businesses.

Original article is in Indonesian, translated by Kristin Siagian

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