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Unsophisticated payment systems and low broadband penetration are retarding e-commerce development in Indonesia but domestic and international companies are positioning themselves for a hoped-for boom in the largely untapped market.

According to a 2008 Nielsen Media Index survey, just 3 percent of Indonesia’s 50 million Internet users have bought something online. This compares with 97 percent in Japan, 80 percent in Singapore, 60 percent in Australia and 43 percent in Thailand.

Andi S Boediman, the chief innovation officer at Metranet, an online shopping subsidiary of PT Telekomunikasi launched this year, estimated e-commerce was worth just Rp 200 billion ($21.8 million) a year in this country.

Telkom has invested $2 million to develop Plasa.com — an e-commerce portal that aims to attract 1,000 merchants and have a million products for sale by the end of the year.

Given that Indonesia is projected to have 150 million Internet users by 2014, Andi is optimistic about e-commerce’s potential. Telkom estimates annual e-commerce transactions will be Rp 1 trillion by 2013, and he hopes his company will grab 10 to 15 percent of that market.

But Andi said e-commerce had tended to take off in countries with high broadband penetration, and less than 10 percent of Indonesians have such access.

He said rapid growth was being seen in mobile Internet and e-commerce would follow in two to three years.

Telkom could face stiff competition from a joint venture between Japanese Internet company Rakuten and PT Global Mediacom, which announced last week that it is planning to launch an online Indonesian shopping mall this year.

Rakuten and Global Mediacom, a subsidiary of tycoon Hary Tanoesoedibjo’s MNC group, said they aimed to build Indonesia’s No.1 Internet shopping site by combining Rakuten’s e-commerce technology and Global Mediacom’s marketing capability. About $4.4 million will be spent developing the site.

Rakuten has operated an Internet mall in Japan for 13 years. It has 64 million registered members and sales in 2009 totalled $3.2 billion. About 31,000 merchants sell goods through its online mall.

Despite Telkom and Global Mediacom’s grand plans, many existing e-commerce sites are struggling.

Hendrik Tio, chief executive of Bhineka.com, a local online shop for electronics such as computers and accessories, said Indonesians still had a conventional mind-set when it came to shopping and had more trust in purchasing items directly in a store.

Bhineka launched as an online-only retailer three years ago but has yet to turn a profit. It subsequently set up bricks and mortar stores and now views its online store mainly as a way to promote items in its shops.

“The biggest obstacle is trust. Indonesian people prefer to just check the price on our Web site and then they prefer to see and purchase the items directly in stores,” Hendrik said.

Lack of a sophisticated payment systems is also seen as holding back e-commerce in Indonesia. Popular sites such as Kaskus.us, where users can buy and sell mainly secondhand goods, rely mainly on bank transfers. More sophisticated payment systems, such as PayPal, are still unavailable on most Indonesian sites.

While Indonesians are enthusiastic Internet users and have taken like ducks to water to social networking (it has the fourth-largest number of Facebook subscribers worldwide), whether e-commerce will take off remains to be seen.

According to Indonesia Telecommunications Users Group secretary general Muhammad Jumadi, higher levels of broadband penetration and more sophisticated payment systems, which instill trust in their users, will be key to making it happen.

“If the speed is not up to par, then users will be disappointed and turn away,” he said.