Using Human-Centered Design for e-Payment Systems in Indonesia

This is the second of a two-part blog series that presents some of the key findings from CGAP’s Applied Product Innovation project with Indonesia’s largest mobile network operator, Telkomsel. In collaboration with Telkomsel, frog and Dalberg Global Development Advisors, we aimed to solve both systemic and design challenges that hinder the payment process for small and traditional merchants.   

It can be difficult to encourage users to adopt new and untested platforms, technologies and products. In the case of new payment systems in countries like Indonesia, we know that end clients will refrain from adopting them until the number of merchants who easily understand and accept these new systems reaches a critical mass. The same can be said about merchants. Business owners of all sizes hesitate to buy in until the customer base has grown to a significant size. Thus, we have a classic “chicken or the egg” dilemma.

Many banks in Indonesia and elsewhere are trying to tackle the problem by mass distributing point-of-sale (POS) devices at no cost to merchants. However, this requires an enormous investment in hardware when the return is uncertain. In fact, in some of our recent visits with merchants in Indonesia, we observed numerous POS devices unused and collecting dust. Some were not even plugged into a power source. This is exactly what Telkomsel – Indonesia’s largest mobile network operator – is looking to transform.

So what is an effective way to encourage adoption by both merchants and clients? That is what we set out to discover.

Many banks massively distribute their POS devices at no cost. Photo credit: Gaurav Gupta, Dalberg Global Development Advisors

Understanding the Context

Our immersion in Indonesia quickly provided evidence of a strong, incumbent cash culture in the country. ATMs are ubiquitous in urban areas, supporting the continued culture of cash churn. Cash transactions are quick, final and provide businesses on-hand cash to pay suppliers and partners. 

Consumers are also highly sensitive to social context and carefully choose their payment methods to match the situation. After all, a slow, inconvenient payment method might not only delay payment for the customer but also cause inconvenience to others in line, which merchants and customers both want to avoid. Any new payment method must take this broader context into consideration to be successful.

Despite the availability and entrenched nature of cash, e-payment tools – including POS devices – offer a variety of benefits to both merchants and their end clients. They can, for example, reduce manual counting errors, eliminate cash handling risks, and improve tracking of expenditures.  

Some stores are perceived as “cash places”, where people would only use cash. Photo credit: Shirley Chen, frog

The Approach: Human-Centered Design

For this project, we set out to better understand what users need to adopt a more efficient and secure system of digital payments leveraging low cost smartphones and mPOS devices. In order to answer that question, the team utilized human-centered design (HCD) methodology.

We conducted in-depth interviews with selected micro and small enterprise owners and their clients around key themes, using worksheets and activities that provided a neutral space for feedback. Next, we developed “iconic representatives” from each participant group, and the team took on these perspectives in an ideation workshop. We whittled down the 58 ideas generated during the workshop to four priority concepts to drive new product development with the Telkomsel team. These were then rapidly prototyped in the field – important for quickly validating and iterating the ideas without losing time in development.

Going through one of the interview activities with Nanang, manager of a restaurant. Photo credit: Hammans Stallings, frog

Based on this research we developed “experience principles” to guide the development of an e-payment system in Indonesia.  These principles include:

  • Help merchants offer better e-payment tools and cash payment options. Don’t force traditional merchants to trade cash away when they have yet to see the benefits of e-payment. Cash represents convenience, flexibility, negotiability and a sense of control. Although people do recognize the inherent risks associated with handling cash, they are not always seen as significant enough to seek alternatives. However, people do recognize the benefits that come with e-payment, such as transaction tracking and budget control. Creating a system that accommodates both e-payments and cash payments will be crucial to driving early adoption.
  • Aim to develop transformative business solutions that go beyond payments. Merchants we spoke with are very interested in the value-add services that can be offered on their smartphones, which are often proxies for computer systems for micro and small businesses. Payment is merely one of many complicated business tasks they need to perform. Many of the business owners didn’t have formal business training; they learn by doing and through trial and error. Providing an e-payment system with the potential to advance their business answers a number of their core needs. 
  • Energize and enable a community of first-movers. Innovators and early-adopters are characterized by their ability to identify the benefits of embracing new technologies. In contrast, early and late mainstream users require more tangible evidence in order to make their decision. They are not interested in what an e-payment system could do; they are interested in what an e-payment system could enable them to do. Engage Innovators and early adopters through beta testing and rewards to create real world examples that demonstrate the benefits of the e-payment system while generating greater interest through word-of-mouth.

Influencing people’s behaviors is always a challenge, especially when dependencies and money are involved. With the HCD approach, we uncovered the needs of merchants – needs that payment companies should consider in designing solutions and ultimately cracking the “chicken or egg” dilemma on e-payment usage.



30 July 2014 Submitted by Jacqueline Devine (not verified)

Thank you for sharing this story. Interesting parallels with the sanitation and hygiene sector where HCD has also been used to develop low cost but aspirational latrines and hand washing stations. So many insights to gain, particularly in sectors where the mindset has been traditionally focused on technologies and not products.

06 August 2014 Submitted by Iwan Nazirwan (not verified)

When I was a branch manager in one district of Central Java, there was evidence that every weekdays the branch replenished 10 billon cash for satisfied cash witdraw mostly from tellers. When I asked them why they like bring cash with a number of risk n weakneses, they aswer is simple.. When we have cash life become simplier n convincing. It was 7 yeas ago

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