Visa Int'l forecasts Indonesia debit card boom

Visa Int'l forecasts Indonesia debit card boom

Dow Jones, Jakarta

Indonesian consumer enthusiasm for non-cash deals could help U.S. credit card company Visa International boost debit-card penetration by double digits annually through 2009, a company executive said.

The number of Visa-branded debit cards in Indonesia almost tripled year-on-year to 6,756,000 in 2004, and the volume of retail sales facilitated by the cards rose 32 percent in the same period, said James Murray, Visa's executive vice president for South and Southeast Asia.

"I could see (debit) card numbers growing like that for the next three or four years without much trouble," Murray told Dow Jones on Wednesday.

"Before the (1997-98 Asian financial) crisis, the payment card market was really driven as credit cards... (now) the real engine is offering basic electronic payment services to people on the street."

Murray said that Visa, through its network of 17 member banks including Bank Mandiri and Bank Central Asia, holds a 65 percent share of Indonesia's credit and debit card market.

That puts Visa ahead of rivals Mastercard International and American Express Co.

The driver of Indonesia's strong debit-card demand is a combination of recent economic revival and a vast untapped market of consumers who still rely on cash for financial transactions.

Indonesia's gross domestic product surged 6.35 percent year-on-year in first quarter, putting the economy on track for a projected 6.0 percent expansion for the year. That result would outpace last year's 5.1 percent rise and place the official target of 6.6 percent annual growth from 2004 to 2009 within reach.

Growth in Indonesia's currently relatively small number of bank depositors -- 60 million in a country of 210 million people - will also likely help deliver new Visa card clients, Murray said.

Visa statistics indicate that currently only 1.6 percent of every US$100 in consumer spending in Indonesia is done with a debit card, compared to around 8 percent in Thailand.

Visa will expand its range of debit card services for Indonesia's consumers to include an automatic mobile-phone charge payment system and an automatic cash-transfer system between Visa card holders.

The projections of booming debit card use contrast with what Murray describes as the "dismaying" downturn in foreign tourist credit-card transactions in Indonesia after the massive Dec. 26 earthquake and tsunami that devastated the northwestern province of Aceh.

Murray said foreign tourist Visa credit-card use in Indonesia declined 7 percent year-on-year from the beginning of January to the end of the week of May 8.

That decline threatens an annual $500 million in such transactions in the country.