May 26, 2014 6:45 pm JST

Bank Mandiri targets Indonesia's unbanked smartphone users

WATARU SUZUKI, Nikkei staff writer

JAKARTA -- Bank Mandiri, Indonesia's biggest bank by assets, is venturing into the mobile financial services market. In doing so, it aims to connect with millions of Indonesians who do not have bank accounts.

     The state-owned lender last week launched a smartphone application called Mandiri e-cash, available for free on Android, iOS, Nokia, and Blackberry devices. By creating an online account with their phone number, users can go to participating retailers and purchase a balance up to 1 million rupiah ($90). This money can then be used to pay, say, electric bills. It can also be used as telecom credit. 

     Several big lenders, including Bank Central Asia and Bank Rakyat Indonesia, have introduced apps that allow account holders to make certain transactions via their phones. But Mandiri is one of the first to enable payments directly from smartphones.

     Electronic payment is a relatively new concept in the country. Hery Gunardi, director of Mandiri's micro and retail banking division, says almost 80% of financial transactions in Indonesia are made in cash. But the market has potential, given the rapid proliferation of mobile phones.

     According to Mandiri, while only 60 million people in Indonesia have bank accounts, there are 240 million cell phones -- not far off the country's total population.

     Mandiri aims to close the gap by providing exclusive services to account holders, such as allowing them to withdraw their balance in cash from ATMs and transfer money to other users. The bank says it is working with e-commerce companies and fast food chains to enable delivery orders to be placed through smartphones.

     Major lenders, which previously saw robust profit growth thanks to high-yielding loans, are now dealing with slower demand for credit. Indonesia's central bank hiked interest rates in the second half of 2013, forcing companies to cut back on spending. Executives of big banks have since acknowledged that loan growth will be slower this year.

     By making itself a hub for e-payments, Mandiri seeks to boost its income from transaction fees.