Industry experts are doubtful the new cartel can compete with Go-Jek or Ovo

In a sign of just how important Go-Jek and Ovo have become in Indonesia, five of the largest Indonesian state owned enterprises are merging their mobile payment services to compete with the two tech companies, according to Nikkei Asian Review.

The companies are in the banking and communications sector and the new mobile payments service will be called LinkAja. It is expected to launch in March.

The SOEs involved are as follows:

Telekomunikasi Indonesia (Telekom)

Bank Mandiri

Bank Rakyat Indonesia

Bank Negara Indonesia

Bank Tabungan Negara

The state-owned oil company Pertamina is expected to join the group. The future of LinkAja will probably include a move beyond just payments and into other financial services.

LinkAja will be run by Fintek Karya Nusantara, a subsidiary company of Telekom. Telekom has a 25 per cent stake in the new venture while three banks (Bank Mandir, Bank Rakyat Indonesia, Bank Negara Indonesia) will hold 20 per cent. Bank Tabungan Negara will have 7 per cent of LinkAja.

There is also talks to onboard Alipay and WeChat Pay onto the service.

As e27 reported in our ecosystem report, 2018 was the year Indonesians began to adopt digital payments (driven by Go-Jek/Ovo and the government’s move to integrate digital options into highway toll payment infrastructure).

These state-owned enterprises seem to recognise the importance of having a digital solution while recognising they have a long way to go to catch up with Go-Jek and Ovo. They seem to have decided that the only way to compete was to work together.

Because Go-Jek is so widely used as a do-everything app, its payment infrastructure was able to leverage the network affect and grow into one of the most popular mobile payment options in the country.

Ovo started as a mobile payments company and partnerships with the likes of Tokopedia have helped it grow into the next potential Indonesian unicorn. It received major investment from the Indonesian conglomerate Lippo Group and is the main payment service for Grab.

Industry experts cited by Nikkei Asian Review were skeptical that LinkAja could compete with GoJek or Ovo.

Digital wallets are seen as important by the Indonesian government, with Nikkei Asian Review citing a statistic that 50 per cent of people over the age of 15 do not have a bank account.