An Indonesian whitepaper on how payment methods can be improved has just been published. The paper was drafted through the partnership of UnPAY, a one-stop payment platform, and Tencent Research Institute. Hotspots and key payment processes in Indonesia are the main themes of the paper.
As part of ‘Venturing Out’ series, the whitepaper seeks to provide information for the Chinese payment firms that will be establishing enterprises abroad to have a deeper understanding of the financial system in Indonesia or the fourth most populous country worldwide. In October 2018, the very first published whitepaper focused on Singapore’s payment infrastructure.
Recognized as a developing economy, Indonesia is a key ASEAN member with a recorded GDP of US$1.016 trillion in 2017. By 2020, the country’s growth rate is set to achieve 5.3%. Cash remains on top as being widely used in Indonesia. It has a low rate of 34% with regard to the use of traditional bank accounts.
With its untapped potential market, Indonesia has an attractive financial industry for promoting digital payments in the country.
To have easy access to the Indonesian payment firms, a comprehensive license access system should be secured by a foreign provider. This is both regulated by the Central Bank of Indonesia and Otoritas Jasa Keuangan, the two notable financial and payment transaction service agencies.
Payment services are grouped as front-end and back-end. The front-end services involve firms that directly transact with the clients, including acquirers, payment gateway operators, and e-wallets.
The back-end parties have no direct interaction with the customers such as card firms, clearing houses, and final settlement departments. For all applicants, they are only allowed to transact in only one of these two categories. However, applying for several licenses in one category is acceptable.
Indonesia’s payment infrastructure has three methods such as card payments, peer-to-peer (PTP), and digital money. The card payment type is solely limited to using credit cards, ATM cards or debit cards. PTP regulations enable the transfer or payment gateway services and e-wallet service providers. However, payment service providers (PSPs) are discouraged in using virtual currencies when making PTP payments.
In the use of the digital money quota management, those who are unregistered can be allowed up to 2 million rupiahs while the registered users are provided 10 million rupiahs in wallet limits. Each month, the online trading limit is only 20 million rupiahs.
On December 21 of the previous year, about 34 Indonesian institutions had earned e-money business licenses. The market major players were T Cash, GoPay, PayPro, and OVO.
For an improved cohesiveness and reliable payment structure, the Central Bank of Indonesia has created a national payment gateway (GPN) in incorporating the fragmented payment solutions.
The GPN works as a unified and interconnected clearing network that integrates all Indonesian payment platforms such as ATMs, POS, payment gateways and e-payment approaches such as credit and debit cards.
Still, in the pipeline, the Central Bank of Indonesia will be creating a unified QR code payment system infrastructure to promote interoperability and more secure payments.