Between Admin Fees and Digital Platform Innovation
The plan by the Minister of Cooperatives and SMEs, Maman Abdurrahman, to formulate regulations limiting admin fees on e-commerce platforms reflects the government’s intention to safeguard the sustainability of SMEs amid escalating challenges. The government appears to be giving serious attention to the cost structure in the digital ecosystem largely inhabited by SMEs. Currently, SMEs comprise around 64.1 million business units or 99.9% of the total businesses in Indonesia and contribute 61.07% to GDP.
However, formulating such regulations also requires high-level technocratic precision. After all, such regulations resemble price interventions. Or, at the very least, interventions that could potentially affect price mechanisms. Yet, Nobel laureate George Stigler (1971) warned in his theory of regulatory capture that any price intervention not grounded in robust data analysis could trigger negative externalities for the entire ecosystem.
To date, digital platforms have also driven SME revenue growth. Tulus Tambunan (2020) states that integrating SMEs into the digital ecosystem has become a catalyst for reaching markets previously inaccessible geographically. Revenue increases are also enabled because platforms provide massive digital infrastructure, which is a primary determinant in SME business resilience during crises (Rahayu & Day, 2017).
Findings from the Ministry of Cooperatives and SMEs (2020) indicate that SMEs connected to digital platforms are more capable of surviving crises compared to those not digitised. But, of course, those benefits come with certain cost structure consequences. The problem is that this cost structure is often viewed merely as an administrative burden.
The government should provide socialisation that there is a shift in cost structure for SMEs when doing business in the digital era. Evans & Schmalensee (2016) explain that admin fees can be understood as compensation for services that significantly reduce transaction costs. Before the platform era, SME actors had to bear costs of finding buyers, trust verification costs, and risks of independent payment systems, the values of which often exceeded current platform commission rates. Digital platforms have internalised those risks into an integrated and efficient ecosystem.
There is also a transformation from fixed investment costs to variable operational costs. Hagiu & Wright (2015) explain that, to some extent, platforms help reduce the need for inventory investment and physical infrastructure in several SME business models. For SME actors, this model means eliminating the need to rent physical assets in expensive strategic locations. Platforms convert those investment risks into costs that only arise upon successful sales transactions. This is actually extraordinary efficiency but often overlooked due to its intangible nature.
Moreover, SMEs remain business entities operating in competitive markets. They must be professional in managing their business models independently and resiliently. The Ministry of Cooperatives and SMEs (2020) notes that only 13% of SMEs are truly connected to the digital ecosystem. Currently, that number has increased significantly. According to Parker, Van Alstyne, & Choudary (2016), visibility costs such as advertising or promotions are indeed necessary for SMEs to win customer attention. These costs should not be seen as a deadly burden. They are opportunities for SME fighters to enter a more solid transformation phase.
The government can help SMEs conduct economic studies and highlight product uniqueness. Provide training or internet access assistance, for example. Assist the transition process to the digital ecosystem accompanied by efforts to build mental resilience and adaptability. This is important because 34.6% of SMEs chose to switch to online marketing as a primary strategy to survive during crises. Then, formulate healthy regulations that respect the hard work of local innovators by encouraging them to become efficient, resilient, and globally competitive entities. Indonesian SMEs have great potential to win markets through continuously honed creativity and professionalism.
Preserve Incentives for Innovation
The existence of platforms as innovation ecosystems, according to Gawer (2014), has provided high-level technology access to SMEs and enabled them to compete with giant corporations. Admin fees charged by platforms relate to maintaining infrastructure, servers, algorithm development, and cybersecurity systems that protect transaction data. Without adequate revenue, platforms will lose their ability to innovate. Yet, innovation is the pulse of every platform. Inherently, digital platforms create value by facilitating interactions and driving innovation (Parker et al., 2016; Gawer, 2014; Evans & Schmalensee, 2016).
That is why protecting SMEs also needs to consider innovation incentives for platforms that have supported national economic digitalisation. To date, digital platform revenues in Indonesia have not been particularly strong. If revenues become even scarcer, making platforms unable to innovate, it could harm SMEs themselves. Supporting platform features will lag, data security will be at risk, and markets will shrink. This could clearly squander Indonesia’s vast digital economic growth, with e-commerce gross merchandise value (GMV) around Rp1.15 quadrillion in 2025. Platform innovation progress is indeed key to the sustainability of this ecosystem.
Gawer (2014) also highlights that sensitivity to admin fees directly relates to SMEs’ position in the value chain. For business actors who