PAYMENT, CLEARING AND SETTLEMENT SYSTEMS IN INDONESIA
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PAYMENT, CLEARING AND SETTLEMENT
SYSTEMS IN INDONESIAIndonesia
CONTENT
LIST OF ABBREVIATIONS ........................................................................................ 7
INTRODUCTION ........................................................................................................ 1
1. Institutional aspects .................................................................................................................. 1
1.1. Legal and Regulatory Framework ............................................................................................ 1
1.1.1. Payment and Settlement System.................................................................................................. 2
1.1.2. Securities Settlement System ........................................................................................................ 3
1.1.3. Other form of rules and regulations ............................................................................................ 4
1.2. Roles of Bank Indonesia ........................................................................................................... 4
1.2.1. Regulator and overseer of payment systems ............................................................................ 4
1.2.2. Provision of Settlement Account ................................................................................................. 5
1.2.3. Operator of Interbank Payment Systems and Securities Settlement System .................. 5
1.2.4. Facilitator of Development in Payment Systems .................................................................... 5
1.3. The role of other private and public sector bodies ................................................................ 6
1.3.1. BAPEPAM-LK ................................................................................................................................. 6
1.3.2. Providers for payment services .................................................................................................... 6
1.3.3. Providers for Clearing, Guarantee, Settlement, and Depository Services of Securities
Transactions .................................................................................................................................... 8
1.4. Recent developments ................................................................................................................. 8
1.4.1. The Indonesian act on funds transfer .......................................................................................... 8
1.4.2. Self Regulatory Organization (SRO) .......................................................................................... 8
2. Payment media ........................................................................................................................ 9
2.1. Cash .............................................................................................................................................. 9Indonesia
2.2. Non-cash ..................................................................................................................................... 9
2.2.1. Credit funds transfer ....................................................................................................................... 9
2.2.2. Cheque and bilyet giro ................................................................................................................... 9
2.2.3. Direct debit ...................................................................................................................................... 10
2.2.4. Card-based ....................................................................................................................................... 10
2.2.5. Electronic Money (e-money) ..................................................................................................... 11
2.2.6. Non cash terminals ........................................................................................................................ 11
2.3. Recent developments .............................................................................................................. 12
2.3.1. National standard of chip card specification for Indonesia ATM/debit cards ............. 12
2.3.2. Interoperability of e-money ........................................................................................................ 13
2.3.3. National Payment Gateway (NPG) .......................................................................................... 13
3. Payments and settlement systems.......................................................................................... 14
3.1. Overview ................................................................................................................................... 14
3.2. Large value Payment System .................................................................................................. 16
3.2.1. Institutional framework................................................................................................................ 16
3.2.2. Participation .................................................................................................................................... 17
3.2.3. Types of transactions .................................................................................................................... 18
3.2.4. Operating hours .............................................................................................................................. 18
3.2.5. Sources of liquidity ....................................................................................................................... 19
3.2.6. Management of credit risk of FLI ............................................................................................. 20
3.2.7. Settlement mechanism and management of risk .................................................................. 20
3.2.8. Technical aspect ............................................................................................................................. 21
3.2.9. Pricing policy .................................................................................................................................. 22Indonesia
3.3. Interbank Retail Payments Systems .......................................................................................22
3.3.1. SKNBI for interbank retail payments ....................................................................................... 22
3.3.2. Shared ATM networks/switching services ............................................................................. 25
3.3.3. EFT POS networks/switching services .................................................................................... 26
3.4. Bank Indonesia Government Electronic Banking (BIG-eB) ..............................................26
3.5. Major ongoing and future projects ......................................................................................... 27
3.5.1. Enhancements in Indonesia LVPS: 2nd Generation BI-RTGS System ......................... 27
4. Post-trade processing, clearing and securities settlement in Indonesia ................................. 30
4.1. General Overview .....................................................................................................................30
4.2. Post Trade Processing Systems ............................................................................................... 30
4.2.1. Trading and Confirmation ........................................................................................................... 30
4.2.2.Trade Repository ............................................................................................................................. 32
4.3. Central Counterparties and Clearing System........................................................................32
4.3.1. Clearing System ............................................................................................................................. 32
4.4. Securities settlement systems .................................................................................................33
4.4.1. Settlement system for the government securities and instruments of Bank Indonesia
open market operations ............................................................................................................. 33
4.4.2. Settlement system for securities issued by the private sector ............................................ 34
4.5. Recent development .................................................................................................................35
4.5.1. Enhancements in BI-SSSS: 2nd Generation BI-SSSS ........................................................ 35Indonesia
Indonesia
LIST OF ABBREVIATIONS
ABS Automatic Bidding System
ASPI Asosiasi Sistem Pembayaran Indonesia (Indonesia Payment Systems
Association)
ASBANDA Asosiasi Bank Daerah (association of regional/provincial banks)
ATM Automated Teller Machine
BAPEPAM-LK Badan Pengawas Pasar Modal dan Lembaga Keuangan (Indonesia Capital
Market and Non Bank Financial Institution Supervisory Agency)
BEI Bursa Efek Indonesia (Indonesia Stock Exchange/IDX)
BI Bank Indonesia
BidCC Bidding System Central Computer
BIG-eB Bank Indonesia-Government Electronic Banking
BI-RTGS Bank Indonesia-Real Time Gross Settlement
BIS Bank for International Settlement
BI-SSSS Bank Indonesia-Scripless Securities Settlement System
C-BEST Central Depository and Book Entry Settlement System
CCP Central Counterparty
CP SIPS Core Principles for Systemically Important Payment System
CSD Central Securities Depository
DVP Delivery Versus Payment
EFT POS Electronic Funds Transfer at Point of Sale
FAFO First Available First Out
FIFO First In First Out
FLI Fasilitas Likuiditas Intrahari (intraday collateralized liquidity facility)
FOP Free of Payment
FSAP Financial Sector Assessment Programme
FTS Failure to Settle
HIMBARA Himpunan Bank Pemerintah (association of state-owned banks)
IC Integrated Circuit
KPEI Kliring penjamin Efek Indonesia (Indonesia Clearing and Guarantee)
KSEI Kustodian Sentral Efek Indonesia (Indonesia Central Securities Depository)
LPEI Lembaga Penjamin Ekspor Indonesia (Indonesia Export Financing
Institution)
LVPS Large Value Payment System
MoF Ministry of Finance
NPG National Payment GatewayIndonesia NSICCS National Standard of Chip Card Specification OMO Open Market Operation OTC Over the Counter PBI Peraturan Bank Indonesia (Bank Indonesia Regulation) PERBANAS Persatuan Bank Swasta Nasional (association of private national banks) PIN Personal Identification Number PVP Payment Versus Payment SBI Sertifikat Bank Indonesia (Bank Indonesia certificate/the central bank bills) SBN Surat Berharga Negara (the government securities) SBSN Surat Berharga Syariah Negara (the government sharia securities) SCC BI-SSSS Central Computer SEBI Surat Edaran Bank Indonesia (Bank Indonesia Circular Letter) SRO Self Regulatory Organization SSS Securities Settlement System SSTS Scripless Securities Transfer System ST BI-SSSS Terminal STP Straight Through Processing SUN Surat Utang Negara (the government conventional securities) SWIPS System Wide Important Payment System TSA Treasury Single Account VPN Virtual Private Network
Indonesia
INTRODUCTION
Indonesia Rupiah (IDR) payment services in Indonesia are provided by the central bank,
commercial banks and non-bank institutions. With respect to payment systems, the central bank
provides Bank Indonesia Real Time Gross Settlement (BI-RTGS) system and Bank Indonesia
National Clearing System (Sistem Kliring Nasional Bank Indonesia (SKNBI), in Bahasa). For
transferring and settling transactions of domestic securities, there are 2 (two) securities settlement
systems in the country handling such services; one is operated by Bank Indonesia and the other is
operated by Indonesia Central Securities Depository Corporation (i.e. PT. Kustodian Sentral Efek
Indonesia (PT. KSEI)).
BI-RTGS system was put into operation in 2000 to make settlements of the large value interbank
credit funds transfers1, monetary operations conducted by Bank Indonesia, and net figures from
the retail interbank payment systems in the country. Participants of BI-RTGS system are mostly
the commercial banks and a few selected non-bank institutions. Further developments in BI-RTGS
system, known as the 2nd generation BI-RTGS system, will incorporate offsetting features of
bilateral and multilateral netting with the purpose of economizing on the use of liquidity for
settlement.
SKNBI launched in 2005 is a deferred multilateral net settlement system for retail interbank credit
funds transfers and payments by check and other debit instruments. Since the end of 2010 SKNBI
has been linking 109 local clearing houses throughout the country, 39 of which are operated by
Bank Indonesia head and regional offices and the remaining by branches of appointed commercial
banks.
Commercial banks are the basis in providing payment services to the public. Commercial banks
provide payment services through their own intra-bank on-line funds transfer network and
interbank payment switching services2 in the country.
Non-bank institutions which provide payment services can generally be divided into institutions
authorized to conduct payment services by law, or licensed by Bank Indonesia. They provide the
alternative services for people not yet covered by banking services. In the end of 2006, Bank
Indonesia issued the regulation on money remittance services covering remittance services
conducted by non-bank institutions so as to assure the implementation of consumer protection
principles and to fulfill recommendation from international agencies with regard to the anti money
laundering concern.
1. Institutional aspects
1.1. Legal and Regulatory Framework
1
i.e. settlement of payment obligations from financial markets in the country and time-critical
interbank credit funds transfers.
2
Switching services are companies that provide the routing and clearing of data among banks in
the interconnected ATM network.
1Indonesia
Bank Indonesia has legal power to play the role as regulator, operator, and overseer of
payment systems in Indonesia.
1.1.1. Payment and Settlement System
1.1.1.1 Bank Indonesia Act
Bank Indonesia Act (BI Act), the Act number 23 of 1999 on Bank Indonesia as lastly amended by
the Act number 6 of 2009 (hereinafter referred to as BI Act), is the main source of stipulations
regarding payment systems in Indonesia.
Under BI Act, Bank Indonesia has solitary objective to achieve and maintain the stability of IDR.
In regulating and safeguarding the smoothness of payment systems, Bank Indonesia is
authorized to operate, grant approval and license to operate payment systems services;
require operators of payment systems services to submit reports on their activities; and
determine the use of payment instrument.
With those authorities, Bank Indonesia plays strategic roles as operator, regulator, facilitator and
overseer of payment systems.3
BI Act also provides the basis for Bank Indonesia to:
regulate and operate clearing system for interbank payments;
approve the operation of clearing systems for interbank funds transfers that is conducted by
parties other than Bank Indonesia;
conduct settlement services for interbank payments; and/or
approve the operation of settlement services for interbank payments that is conducted by
parties other than Bank Indonesia.
1.1.1.2 Other related Acts
Act 7 of 1992 on Banking, as amended by Act 10 of 1998 (hereinafter referred to as Banking Act),
sets out general stipulations on banking activities. Under Banking Act, there are 2 (two) types of
banks, commercial banks and rural banks. Article 6.e of Banking Act stipulates that commercial
banks can conduct fund transfers, whether on its own behalf or on their customers’. For rural
banks, there are some limitations regarding their participation in payment systems.
3
BI Act provides authority for BI to regulate, operate and oversee payment systems in Indonesia.
2Indonesia
Act 8 of 2010 on the Prevention and Eradication of the Crime of Money Laundering aims at
minimizing the relevant financial crime involving great amounts of assets (currently the
requirement is above 100 million by reducing the possibility of money laundering activities, with
the final goals to safeguard national economic stability and state security. Under this act, operators
of card-based payment instruments, e-money and money remittance are defined as “provider of
financial services” and must meet the requirements regarding anti-money laundering.
Act 37 of 2004 on Bankruptcy and Suspension of Obligation for Payment of Debts provides the
legal basis for the exclusion of “zero hour rules” for payment transactions. This Act states the
finality of settlement in the case of bankruptcy or liquidation in Article 24 paragraph (3) by
regulating that funds transfer made before the pronouncement of bankruptcy shall be completed.
Article 10 of Act 24 of 2004 on Deposit Insurance Agency and its elucidation states that customers’
funds which are going to be transferred out of the bank, but are still under such bank’s
bookkeeping, shall be deemed as customers’ deposits. And likewise, incoming transfers for
customers received by the bank but not yet credited to respective customers’ accounts, shall also
be deemed as customers’ deposits.
Act 21 of 2008 on Sharia Banking stipulates sharia banking activities. Similar to Banking Act, the
Sharia Banking Act divides sharia banks into 2 (two) types, namely sharia commercial banks and
sharia rural banks. Conducting sharia-based transfers, whether on its own behalf or their
customers’, is viewed as one of the business activities of sharia commercial banks in the Sharia
Banking Act. As for sharia rural banks, similar limitations are also put in place as the ones applied
to rural banks under Banking Act.
Act 11 of 2008 on Electronic Transaction and Information serves as the legal basis for the validity
of electronic signature and for the acceptance of electronic information/documents as a lawful
means of evidence. This Act facilitates the industry to take advantage of the latest technology in
developing new payment mechanism.
1.1.2. Securities Settlement System
1.1.2.1 Capital market act
Act 8 of 1995 on Capital Market (Capital Market Act) is the main legislation that regulates
operations of securities exchange, clearing and guarantee for settlement of exchange traded
securities, as well as central securities depository. Under Capital Market Act, the clearing,
guarantee, settlement, depository services are conducted by Indonesia Clearing and Guarantee
Corporation (PT Kliring Penjaminan Efek Indonesia (PT. KPEI)) and PT. KSEI. These institutions
obtain licenses from Indonesia Capital Market and Non Bank Financial Institution Supervisory
Agency (Badan Pengawas Pasar Modal dan Lembaga Keuangan (BAPEPAM-LK)) before
conducting their services. By the end of 2010, BAPEPAM-LK had only licensed PT. KSEI as
Indonesia central securities depository (CSD), and PT. KPEI as the central counterparty (CCP).
1.1.2.2 Government securities acts
3Indonesia
Act 24 of 2002 on Government Securities stipulates the issuance of government securities and
gives mandate to Bank Indonesia as the auction agent and registrar of the government securities.
Similarly, Act 19 of 2008 on Government Sharia Securities provides stipulations regarding the
issuance of the government sharia securities and gives mandate to Bank Indonesia as the auction
agent and registrar of the government sharia securities.
BI Act stipulates that in the event that the government intends to issue the government securities,
the government shall hold prior consultations with Bank Indonesia. BI Act also authorizes Bank
Indonesia to implement monetary policies and operations, including issuance of Bank Indonesia
Certificate as a monetary instrument.
These 3 (three) pieces of legislations provide the legal framework for Bank Indonesia to regulate
and operate Bank Indonesia Scripless Securities Settlement System (BI-SSSS).
1.1.3. Other form of rules and regulations
To complement regulations issued by Bank Indonesia and other relevant authorities, the interbank
payments activities in Indonesia are also regulated by rules formulated by the relevant industries or
participants themselves. These rules are generally issued in the form of bye-laws or other similar
“club rules”, and basically cover more detailed and specific aspects of particular payment activities.
These are usually the area which are not covered by authorities’ regulations and mostly related
with common procedures of certain parts of day-to-day activities. \
1.2. Roles of Bank Indonesia
As payments and settlement systems support functioning monetary and financial systems as well
as economic activities and development, Bank Indonesia has taken a leading function in
developing Indonesia payments and settlement systems to reach the higher stage of both safety and
efficiency. Under BI Act, Bank Indonesia has solitary objective to achieve and maintain the
stability of Rupiah (IDR). One of 3 (three) tasks that Bank Indonesia assumes to meet such an
objective is to regulate and safeguard smoothness of payment systems in the country. In doing
such a task, Bank Indonesia plays the roles as the regulator, overseer, facilitator, and operator.
1.2.1. Regulator and overseer of payment systems
As the regulator, Bank Indonesia issues the regulations with the purpose of achieving higher stage
of safety and efficieny in the payment systems as well as promoting the consumer protection in the
payment industry. Bank Indonesia plays the role as the overseer in order to control risks in the
payment systems and to promote efficiency in the payment systems.
According to BI Act, Bank Indonesia has the power to issue regulations, including the Bank
Indonesia Regulation (Peraturan Bank Indonesia/PBI) and Bank Indonesia Circular Letter (Surat
Edaran Bank Indonesia/SEBI). These regulations, covering the system of making transfers (i.e BI-
RTGS and SKNBI), payment instruments (i.e. Card-based Payment Instruments and Electronic
4Indonesia
Money) and other transfer mechanism (i.e. Money Remittance), are incorporated in the State
Gazette.
1.2.2. Provision of Settlement Account
As stipulated in PBI, Bank Indonesia provides settlement account services for the commercial
banks, government, international monetary/financial institutions and other institutions. The
settlement account is basic current account. The settlement accounts must be in funds at all times
with no credit provided by BI. Institutions shall provide securities in the form of Sertifikat Bank
Indonesia (SBI) and the government securities as the collateral in order to obtain liquidity facilities
from Bank Indonesia. The goal of Bank Indonesia’ settlement account policy is to promote the
national payment system to a higher level of efficiency, safety, integrity, and robustness in the face
of financial crises. When opening the settlement account for an applicant, Bank Indonesia
considers, among other things: whether the applicant fits the definition of commercial bank in
related banking Acts, whether provision of settlement account to the applicant might jeopardize
the soundness and efficiency of the financial system, whether there is a legitimate business interest
that can be served by the settlement account, and whether provision of settlement account would
adversely affect the reputation of Bank Indonesia.
1.2.3. Operator of Interbank Payment Systems and Securities Settlement System
Currently, Bank Indonesia is the main operator of clearing and settlement systems for interbank
payments in Indonesia. Bank Indonesia operates 2 (two) national core interbank payment systems,
i.e. BI-RTGS system as Indonesia systemically important payment system (SIPS) and processing
large-value interbank payments in the country, and SKNBI for retail interbank payments. SKNBI
settles the interbank payments on a deferred multilateral net basis. Since the implementation of
SKNBI, all retail interbank credit funds transfers settled through it are processed paperless
allowing Bank Indonesia to end the use of the paper-based credit note as the payment instrument
for retail interbank credit funds transfers.
Bank Indonesia operates as well BI-SSSS for settlement and depository of securities issued by the
government and for settlement of instruments of OMO by Bank Indonesia.
1.2.4. Facilitator of Development in Payment Systems
As the facilitator, Bank Indonesia guides the development of the national payment systems and
supports the developments of payment systems operated by other players.
Bank Indonesia plays its role as the facilitator or catalyst mainly in the development of the retail
and micro payments systems conducted by players of the retail and micro payments industry, such
as the standardization of payment cards (e.g. ATM/debit cards) and e-money issued by the
industry players and the development of a National Payment Gateway (NPG) for the retail and micro
payments. Bank Indonesia could promote and coordinate with the relevant stakeholders to
implement the relevant initiatives. The general objective is to address specific problems regarding
retail/micro payment system, the solutions of which may be compromised but acceptable for the
relevant individual stakeholders, including Bank Indonesia itself. These solutions could also help
5Indonesia
encourage follow-up innovations and institutional reforms within the retail and micro payments
industry.
1.3. The role of other private and public sector bodies
There are several public sector authorities that relates closely with the provision of payment and
settlement system services, namely BAPEPAM- LK, commercial banks and rural banks, non bank
institutions and also other government authorities such as Ministry of Communication and
Information and Ministry of Trade.
1.3.1. BAPEPAM-LK
BAPEPAM-LK is responsible for regulating and supervising Indonesian capital market, including
the securities transactions in the primary and secondary markets as well as operation of the
securities clearing, settlement and custodian services.
1.3.2. Providers for payment services
Institutions that provide payment services in Indonesia can be grouped into banks and non-bank
institutions.
1.3.2.1. Banks
The Indonesian banking system consists of Bank Indonesia, commercial banks and rural banks.
However, only the first two types of institutions are allowed to provide payment services in a
broad sense, whilst functions for providing payment services of rural banks are limited.
The commercial banks are the largest group of financial institutions providing the payment
services. For the interbank payments, they can be processed through either BI-RTGS System,
SKNBI or the domestic interbank payment switching services 4, and the settlement takes place
through either their settlement account (giro account) held at BI-RTGS system or their settlement
account held at the designated commercial banks. There are now 143 commercial banks (including
the sharia banks and sharia units of the conventional banks) with 14,847 offices.
Meanwhile, rural banks, even though they are part of the Indonesian banking system, according to
the regulation they cannot participate in interbank clearing and settlement. They are also limited to
take deposit (i.e. only in the form of saving and time deposit accounts) and provide loan (i.e. only
in a limited area such as in a sub-district/sub-municipality), as well as not permitted to provide
interbank payments since they are not allowed to provide their customers with giro accounts so
they cannot issue checks and bilyet giros5. Nevertheless, there are rural banks operating in suburb
areas of big cities as well as in small cities and sub-districts/sub-municipalities that have provided
4
They are ATM Bersama, ATM Link, ATM Prima, and Alto.
5
Bilyet giro is a non-negotiable debit instrument, which is very similar in nature to cheque. The main
differences are that bilyet giro can not be cashed by its holder and it can be post dated.
6Indonesia
their customers, especially merchants, with Point Of Sale (POS) devices to provide payment points
for merchants’ customers. Services provided by these payment points are limited to only bill
payments, and merchants cannot accept cash deposits or provide cash withdrawals. There are also
2 big rural banks operating ATM located in their offices with the purpose of providing their
customers with 24ⅹ7 cash withdrawals as well as intra-bank funds transfers and billing payments.
Moreover some rural banks acting as the recipients provide international money remittance
services for Indonesian migrant workers. Until 2010, there are 1,706 rural banks in Indonesia.
1.3.2.2. Non-bank institutions
The involvement of non-bank institutions in Indonesia payments system has been growing
consistently. Their involvements are in the forms of providing payment instruments (such as
issuing credit card, e-money and money transfers), remittance services, and switching services for
inter-bank payments and funds transfers.
With regard to the card-based payment instruments, there is 1 (one) non-bank financial institution
issuing credit card, and the non-bank institutions taking part in the card-based (credit card and
debit/ATM card) payment industry conduct their businesses as the principals 6 , acquirers 7 , and
operators8 of switching, clearing and settlement services.
As for e-money, being the newer type of payment instruments in Indonesia, it is recorded that
there are 9 (nine) institutions issuing e-money at the end of 2010. 4 (four)9 of them are non-bank
institutions, with 3 (three) of them telecommunication companies. Particularly for these
telecommunication companies, it is believed that they will be the frontrunners in providing
payment services via mobile phones for population uncovered by banking services, as the number
of mobile phone’s users in the country is far greater than the number of bank account’s holders.
In relation to money remittance services, besides commercial banks, there are more than 60 non-
bank money remitters providing domestic remittance services, which include Indonesia postal
company (PT. Pos Indonesia) and Indonesia state-owned pawn-shop company (PT. Perum
Pegadaian). Money remittance is of great importance for Bank Indonesia as Indonesia has a great
number of migrant workers, who regularly remit money to their families in their hometown. The
number of these remittances has been growing steadily and it starts to play a worth-to-noted
contribution to the national economy. Justifiably, Bank Indonesia also holds great interest to
assure that consumer protection principles are being applied in the money remittance services.
Those were the rationales Bank Indonesia had issued the regulation on money remittance in 2006,
which in turn triggered the increase in the number of money remitters being licensed or registered
in Bank Indonesia.
6
American Express, Japan Credit Bureue (JCB) Nusantara, Mastercard Internasional Indonesia, Visa
Internasional (Asia-Pacific) Ltd, China Union Pay, PT. Artajasa Pembayaran Elektronis (ATM Bersama),
PT. Rintis Sejahtera (ATM Prima/ATM BCA), PT. Alto Network (ALTO)
7
PT. Finnet Indonesia
8
Japan Credit Bureau (JCB) Nusantara, Mastercard Internasional Indonesia, Visa Internasional (Asia-
Pacific) Ltd, PT. Artajasa Pembayaran Elektronis (ATM Bersama), PT. Rintis Sejahtera (ATM Prima/ATM
BCA), PT. Alto Network (ALTO)
9
PT. Telekomunikasi Indonesia, PT. Telekomunikasi Selular, PT. Indosat, PT. Skye Sab Indonesia
7Indonesia
1.3.3. Providers for Clearing, Guarantee, Settlement, and Depository Services of
Securities Transactions
1.3.3.1. Central securities depository (CSD)
There are 2 (two) CSDs in Indonesia, i.e. PT. KSEI operating its depository and settlement system
called C-BEST and Bank Indonesia operating its depository and settlement system called BI-SSSS.
PT. KSEI is established for the purpose of performing CSD functions by providing custodian
services as well as orderly, fair and efficient settlement services of securities transactions. PT.
KSEI makes rules on the central custodian services and settlement services, as well as the fees of
its services. The rules of PT. KSEI amendments thereof, will only become effective when
approved by BAPEPAM-LK.
1.4. Recent developments
1.4.1. The Indonesian act on funds transfer
The Act covers wide aspects of payment systems, among others: the basic principles of funds
transfer activities, commencement of funds transfer activities, licensing requirement for non-bank
institutions, oversight, and sanctions. The enactment of this Act will make the operation of
payment systems services in Indonesia more secure and efficient.
1.4.2. Self Regulatory Organization (SRO)
Payment System in Indonesia has undergone significant changes for current decade. The
significant changes include the move toward the increasing reliance on the use of newly developed
technologies to enable e-payment. This condition requires the central bank to be able to responsive
to the development of technology.
The establishment of Indonesian Payment system’s SRO in 2011 is one of Bank Indonesia’s policy
to increase the role of industry in developing a payment system in accordance with market demand.
This SRO, which regulated the technical and micro policy for payment and settlement industry,
will be strategic partner of BI in managing and improving efficient, smooth and reliance payment
systems. This institution will become an independent and professional institution which represents
the various players in payment industry and has the ability to accommodate various changes and
progresses that occurred in this industry. Thus, BI can be more focused on macro regulation and
policy and SRO will have the authority to regulate themselves in term of technical aspects such as
standardization, code of conduct etc.
8Indonesia
2. Payment media
2.1. Cash
The Indonesia currency is Rupiah. Under Bank Indonesia Act, any activities involving money or
having a purpose of payment or any obligation which has to be fulfilled by money, if it is
conducted in the territory of the Republic of Indonesia, shall be settled in Rupiah currency, except
otherwise prescribed by Bank Indonesia regulation.
Bank Indonesia has the sole right to issue bank notes and coins. Bank notes in circulation are in
denominations of IDR 1,000; 2,000; 5,000; 10,000; 20,000; 50,000; and 100,000, while coins
issued in circulation are in denominations of IDR 1; 50; 100; 200; 500; and 1,000. Bank notes and
coins in circulation reached IDR 318 trillion in the end of 2010, increasing 44.3% compared to
bank notes and coins in circulation in 2007.
2.2. Non-cash
Non-cash payments in Indonesia are mostly provided by the banking system. Commercial banks
offer a variety of accounts (e.g. saving, checking and time deposit accounts) to their customers,
while rural banks may only offer saving and time deposit accounts. Most commercial banks
provide their customers with ATM services allowing their customers to access directly their saving
accounts at anytime along with the provision of cheque and bilyet giro for checking accounts.
Payments using cards (credit and debit/ATM cards) as well as e-money have been gaining larger
popularity.
2.2.1. Credit funds transfer
Banks provide credit funds transfer services in their offices and via their delivery channels (ATM,
internet and mobile banking). For inter-bank funds transfers ordered by banks’ customers, they can
be processed via shared ATM networks/payments switching services, SKNBI and BI-RTGS
system. There is a threshold for inter-bank credit funds transfers processed through SKNBI, i.e. up
to maximum of IDR100 millions that can be processed via SKNBI. Any amounts of interbank
credit funds transfers can be processed through BI-RTGS system. There is a limit of total IDR25
millions per day per account of banks’ customers for inter-bank credit funds transfers processed
via the shared ATM networks.
2.2.2. Cheque and bilyet giro
It is a common banking practice for commercial banks to provide their customers with cheque and
bilyet giro facilities. Although use of those debit payment instruments tends to decrease recently
due to rapidly growing use of others means of payments, there are customers of banks keeping on
to use them. Cheque and bilyet giro are usually used for payments of regular purchases of goods
and services among businesses and for bill payments.
9Indonesia
To maintain confidence of the society in using cheque and bilyet giro, Bank Indonesia issued a
strict rule with regard to dishonored 10 use of cheques and bilyet giro. If three small amount
cheques and bilyet giros are dishonored within six months, or one cheque or bilyet giro above
amount of IDR 500 millions is dishonored, the customer is “blacklisted” and prohibited from
holding cheque at any banks for a period of one year.
2.2.3. Direct debit
Usage of direct debit is still limited as intra-bank payments. With the lack of an interbank giro
(direct debit) system, utility companies do not yet have alternative for collection of their bill
payments. The available alternative is to make direct debit arrangements with many commercial
banks for collection of their bill payments.
2.2.4. Debit Note
Debit Note is a document submitted by a bank or BI for the purpose of collection from another
bank with maximum amount IDR 10 millions.
2.2.5. Card-based
Card-based payments, with both credit and debit/ATM cards, have been increasingly used in the
local market.
2.2.4.1. Credit card
Major international credit card brands such as VISA, Mastercard, Amex and JCB are widely
accepted for payments goods and services purchases in the country. There is 1 (one) domestic
commercial bank, i.e. Bank Central Asia (BCA), issuing a proprietary credit card called BCA card.
Credit card issuance by commercial banks and non-bank financial institutions must be certified by
respective brand-owners (the principals) and licensed by Bank Indonesia.
Use of credit cards have grown very fast: during 3 years, credit card has grown 51.79 % whereas
in 2007 attaining 129.29 million transactions, in 2010 achieving 180.55 million transactions. On
the other hand total value in the last 3 year also upsurges to 119.44 % from IDR 72.60 billions in
2007 up to IDR 147.22 billions in 2010. There are about 13.22 million cards in circulation in
201011.
2.2.4.2. Debit/ATM (cash) card
In the last 5 years, debit/ATM card payments have been growing significantly from 1,103.23
million transactions in 2007 to 1,641.40 million transactions in 2010, increasing 48.8%.
10
i.e. payments using check or bilyet giro that do not cover with sufficient balance of funds in account of
banks’ customers paying with those debit payment instruments
11
Data until November 2010
10Indonesia
Nevertheless, compared to Indonesian population, use of debit/ATM cards is still insignificant,
averaging at 6 transactions per person per year in 2010. There are 3 (three) domestic shared ATM
networks (ATM Bersama, ATM Prima/ATM BCA and Alto) and two international shared ATM
networks (Cirrus of Mastercard and Plus of Visa International) existing at the moment. The
domestic shared ATM networks are not yet linked to each other forcing some banks to become
members of more than one networks. ATM cards are used not only for withdrawals and account
balance inquiries, but also for intra and interbank funds transfers as well as utilities payments such
as payments for telephones/mobile phones bills, credit card bills, electricity bills, tax bills, etc.
Debit card payments at point of sale (EFT POS) have been becoming more popular, mostly in big
cities. Some domestic banks have issued debit cards with the brands of Maestro of Mastercard and
Visa Electron of Visa International. The other banks issue proprietary debit cards with a current
large number of POS devices at merchants’ sites. The lack of business agreements among the
various parties seems a major obstacle to achieve a “one POS terminal per merchant” vision. There
are currently 46 commercial banks offering debit cards to their customers. In 2010, there are about
51.8 million cards in circulation.
2.2.6. Electronic Money (e-money)
E-money in Indonesia is categorized into two types. One is the chip-based in which the value of
money is stored in an integrated circuit (IC) chip embedded in devices such as plastic cards, and
the other is the server-based in which the value is stored centrally in servers of the providers of e-
money services.
There are currently 9 (nine) e-money issuers, i.e. 5 (five) commercial banks and 4 (four) non-bank
institutions. Such a newer payment instrument offers the society a cashless payment, especially
micro payments, such as for transportation, gasoline purchases, purchasing goods at convenient
stores and vending machines, as well as payments for toll and parking charges. Under a Bank
Indonesia regulation, the maximum value that can be stored in e-money is IDR 1 million for
unregistered e-money and IDR 5 millions for registered e-money. Moreover, the total value of
payments in one calendar month shall not exceed IDR 20 millions.
2.2.7. Non cash terminals
2.2.6.1. Automated teller machine (ATM)
ATM is one of delivery channels allowing banks’ customers to perform routine banking
transactions without having to visit banks’ offices. Initially, ATM was used only for cash
withdrawal and balance inquiry. Since operation of ATM switching services, ATM provides as
well inter-bank funds transfers and bill payments services. As per December 2010, there were
approximately 30 thousand ATMs in Indonesia which has the significant increase of 37% from
2007.
2.2.6.2. Electronic funds transfer at point of sale (EFT POS)
11Indonesia
Payments via EFT POS have been growing steadily in line with the increased acceptance of
merchants for such an electronic payment. EFT POS is the delivery channel allowing ATM/debit
card holders to pay merchants for their purchase of goods and services through online funds
transfers from cardholders’ account to merchants’ account.
2.2.6.3. Phone banking
Phone banking offers services such as orders for funds transfers, account balance enquiries and
billing payments over telephones. With regard to security purpose of using such a delivery channel,
operators of banks providing phone banking services will ask their customers for unique
information of the customers as a means of the authentication.
2.2.6.4. Mobile/SMS banking
Due to rapid growth in mobile phones industry, banks’ customers in these days are able to manage
their payment activities through their mobile phones. The features are similar tothose in phone
banking such as account balance inquiries, billing payments and orders for funds transfers over
mobile phones. For the security purpose, banks’ customers are required to register their mobile
phone number to the banks prior to the provision of electronic payments via such a delivery
channel. Moreover, banks’ customers use unique information of personal identification number
(PIN) for the authentication.
2.2.6.5. Internet banking
Similar to phone and mobile banking, the use of internet banking have been boosting electronic
payment activities as well. Through internet banking, banks’ customers are able to conduct
account balance enquiries, orders for funds transfers and billing payments and to some extent the
internet banking services provide the customers with services for deposit placements, applications
for banks’ loans, etc.
A number of banks have also launched internet payment services that enable their customers to
pay for their internet-through purchases of goods and services.
2.3. Recent developments
2.3.1. National standard of chip card specification for Indonesia ATM/debit cards
With regard to more secure used of ATM/debit cards for electronic payments, Bank Indonesia and
the ATM/debit card payments industry had agreed to implement use of chip in ATM/debit cards
issued in Indonesia, and in the early of 2009 issued the national standard of chip card specification
(NSICCS) for ATM/debit cards. Use of the standard chip will support technical interoperability
among ATM/debit cards in the country, and, thus, facilitate implementation of interlinking the
infrastructures (i.e. ATM and POS networks) of the issuers of ATM/debit cards and the providers
of shared ATM/POS networks.
12Indonesia
2.3.2. Interoperability of e-money
In order to increase efficiency in operations of e-money services, since 2009 Bank Indonesia has
been facilitating the initiative to promote interoperability of e-money services provided by various
providers. The industry will set up the interoperability schemes for both the chip-based and server-
based e-money.
2.3.3. National Payment Gateway (NPG)
Currently Bank Indonesia and the payments system industry have been working together to set out
a NPG for Indonesia. Basically, NPG is needed to improve efficiency of the payments system
industry as a whole. However, the immediate milestone chosen to be set is the existence of NPG
for retail and micro payments.
Focus on retail and micro payments is derived from the existing condition of various front end
delivery channels (e.g ATMs and POS devices) offered by the industry players and no
convergence in using a common (shared) infrastructure for switching retail and micro payments
(e.g. card-based, internet and mobile payments). Through NPG, reduction in duplicative
investments on the delivery channels (i.e. ATMs and POS devices) and efficient operation of
switching services for retail and micro payments in the country can be achieved. Moreover, it will
provide the high efficient, convenient, swift and safe retail payments system for consumers of all
banks and non-banks providing retail and micro payments services all over the country.
NPG will require interoperability of delivery channels and instruments of retail and micro
payments in the country, common and scalable standards for payments messaging exchange,
protocol as well as system/network security and reliability, and financial and operational risk
management tools.
13Indonesia
3. Payments and settlement systems
3.1. Overview
There are 2 (two) payments and settlement systems in the country: interbank large-value payments
system and retail and micro payments system. In the retail and micro payments system, most retail
and micro payments services are provided by commercial banks through some payment
instruments: cheque and bilyet giro, electronic payment instruments and banker acceptance (bank
draft).
Interbank payments with cheques and bilyet giros are processed through SKNBI. SKNBI is a
deferred multilateral net settlement system, in which settlement of net figures from SKNBI is
conducted at the designated time in the same day through BI-RTGS system. For card-based
payment instruments (credit and debit/ATM cards), settlement for the interbank level is also
conducted on multilateral net basis using the central bank money (through BI-RTGS system) or
commercial bank money (through the accounts at commercial banks appointed as the settlement
banks).
For large-value and time-critical interbank payments, settlement of those payments in BI-RTGS
system is performed on a gross basis. Until nowadays, BI-RTGS transactions account for around
90% of total value of the interbank payments in the country.
Table 1: Interbank payments system in Indonesia
Payment systems Settlement
Types of payment Method of Central Commercial
Name
settlement bank money bank money
Interbank large-value credit BI-RTGS Gross V -
funds transfer
Interbank retail credit funds SKNBI Net V -
transfer
Interbank paper-based debit SKNBI Net V -
payments with the
instruments of cheques,
bilyet giro and other debit
notes
ATM Net V -
Shared ATM network Bersama
(domestic) PRIMA Net - V
/ATM BCA
14Indonesia
Payment systems Settlement
Types of payment Method of Central Commercial
Name
settlement bank money bank money
ALTO Net - V
ATM Link Net V
Shared ATM network Cirrus Net - V
(international) Plus Net - V
Shared debit-card network Debit Net - V
(domestic) PRIMA
Maestro Net - V
Shared debit-card network
VISA Net - V
(international)
Electron
Propriatery debit-card Debit BCA Overbooking V
network (domestic)
Visa Net - V
Mastercard Net - V
Credit card
JCB Net - V
BCA Net - V
Propriatery credit-card BCA - - V
network (domestic)
Electronic Money internal - - -
system of
the issuers
Remittance (domestic) internal - - -
system of
the
operators
(i.e. postal
co., telco.
co’s and
others)
Remittance (international) internal - - -
system of
the
operators
(i.e.
Western
Union and
MoneyGra
m)
Funds legs of securities PT. KSEI Net or Gross - V
transactions on IDX or OTC and its
settlement
banks
15Indonesia
LARGE VALUE PAYMENT SYSTEM
The implementation of BI-RTGS system since year 2000 started as a response to the growing
awareness of the need for sound risk management in settlement of large-value funds transfers in
Indonesia. BI-RTGS system operated by Bank Indonesia offers a powerful mechanism for limiting
settlement and systemic risks in settlement process of Indonesian Rupiah (IDR) interbank large-
value funds transfers through its settlement mechanism taking place on a gross basis and in real
time. .
With regard to Bank Indonesia’s functions in the monetary policy implementation, BI-RTGS
system has enabled Bank Indonesia to monitor, in real time, the liquidity condition of all
commercial banks in the country. Accordingly, it makes Bank Indonesia open-market operations
in the domestic inter-bank money market much more effective.
BI-RTGS system can provide:
delivery-versus-payment (DVP) settlement mechanism which has been implemented since
2004 via its DVP link to BI-SSSS; and
payment-versus-payment (PVP) settlement mechanism which has been in operation since
early 2010 via its PVP link to USD RTGS system in Hong Kong (that is, USD CHATS),
which could in turn contribute to the reduction of settlement risk in settlement of both transactions
of securities held with BI-SSSS and domestic interbank USD/IDR FX trades which is the largest
domestic FX market.
According to the results of the financial sector assessment programme (FSAP) on BI-RTGS
system conducted in October 2009 by the assessors from the International Monetary Funds (IMF)
and World Bank (WB), there are 6 (six) core principles12 which are already observed, and 3 (three)
core principles13 which are broadly observed.
The average daily value of BI-RTGS transactions in 2010 is around IDR 218 trillions
(approximately USD 23.9 billion), with daily volume averaging at 56 thousand transactions.
3.2.1. Institutional framework
BI-RTGS system is fully operated, governed and overseen by Bank Indonesia. BI-RTGS System is
an electronic fund transfer system for IDR in which the settlements are performed in a real-time
per individual transaction basis. The BI-RTGS system consists of three main components, which
are the RTGS Central Computer (RCC) in Bank Indonesia, RTGS Terminal (RT) in participants,
and communication network. RT consists of central department and subsidiary department. The
operating rules of BI-RTGS System cover areas such as general duties and responsibilities of the
participants, minimum requirements, and backup requirements.
As the regulator of payments and settlement systems in Indonesia, Bank Indonesia has set a well-
founded legal basis for implementation of BI-RTGS, which is in accordance with core principles
12
CP II, CP III, CP IV, CP VI, CP VII, and CP VIII
13
CP I, CP IX and CP X
16Indonesia
for systemically important payment system (CP SIPS) of Bank for International Settlements (BIS)
and in the forms of PBI and SEBI. The regulation prescribes general provisions with regard to the
legal basis, the rules and procedures, management of risks in the operation of BI-RTG system, the
finality of settlement, the security and reliability of BI-RTGS system, efficiency in the operation of
BI-RTGS, the participation, good governance in the operation of BI-RTGS, the oversight of BI-
RTGS system, and the sanctions. The technical rules for implementation of Bank Indonesia
Regulation are set out in:
- circular letter concerning principles for the operation and oversight of BI-RTGS system (i.e.
the circular letter issued by Bank Indonesia as the regulator of of payments and settlement
systems in Indonesia);
- circular letter concerning the operation of BI-RTGS system (i.e. the circular letter issued by
Bank Indonesia as BI-RTGS operator);
- circular letter concerning processing of payments in BI-RTGS system as concerns for
protection for customers of BI-RTGS participating banks; and
- circular letter concerning the usage fees for BI-RTGS system.
In order to ensure the uniformity for inter-bank funds transfers’ practices among BI-RTGS
participating banks, the participating banks have developed a set of BI-RTGS Bye-laws. The
participating banks, when making inter-bank funds transfers through BI-RTGS system, have to
conform to the Bye Laws. The Bye-Laws was created by all banking associations consisting of
HIMBARA (Himpunan Bank Pemerintah or association of state-owned banks), PERBANAS
(Persatuan Bank Swasta Nasional or association of private national banks), association of foreign
banks, association of joint venture banks and ASBANDA (Asosiasi Bank Daerah or association of
regional/provincial banks). As the follow up to the Bye Laws, the banking associations have
formed a Committee (i.e. the Bye-Laws Committee) to resolve disputes and/or problems that may
arise between BI-RTGS participating banks with respect to interbank funds transfers settled
through BI-RTGS system, and/or to resolve non-compliance actions of any bank. The Bye-Laws
specifies as well certain codes of conduct of interbank funds transfers settled through BI-RTGS
system for the purpose of avoiding gridlock. Furthermore, the committee is also responsible to
make, repeal and/or amend the Bye-Laws.
The committee has also issued a Bye-Law for PVP settlement of IDR-legs of domestic interbank
USD/IDR FX trades settled through USD/IDR PVP settlement mechanism of BI-RTGS system. It
is the uniform custom of practices for BI-RTGS participating banks settling their interbank
USD/IDR FX transactions through USD/IDR PVP settlement mechanism of BI-RTGS system.
3.2.2. Participation
All commercial banks required to hold current account with Bank Indonesia are BI-RTGS
participants. There are 5 (five) non-bank institutions which are also BI-RTGS participants, i.e.
Indonesia Postal Company (PT. POS), Indonesia Central Securities Depository Corporation (PT.
KSEI), Indonesia Export Financing Institution (LPEI), and 2 (two) domestic interbank ATM
17Indonesia
switching/network providers14, since their services requires settlement services at the inter-bank
level, and Bank Indonesia considers that the final settlement of their payment services have to take
place in the central bank money
There are 2 (two) types of the participant, i.e. the direct participants which have BI-RTGS terminal
at their premises and the in-direct participants which do not have BI-RTGS terminal at their bank.
Both types are required to have the current/settlement account held at BI-RTGS Central Computer.
As of April 2009, there are 154 banks and non-bank institutions participating in BI-RTGS.
3.2.3. Types of transactions
BI-RTGS system handles all IDR large-value payments including:
- for settlement of interbank IDR money market transactions;
- for settlement of payment-legs of transactions of IDR denominated securities held with BI-
SSSS;
- for settlement of IDR-legs of domestic interbank FX against IDR trades;
- for settlement of Bank Indonesia monetary operations;
- payments of large and time critical government transactions; as well as
- funds transfers of large and time critical transactions of commercial banks’ customers.
BI-RTGS system also settles the net figures from SKNBI and the clearing results from a domestic
inter-bank ATM switching15 in the country.
BI-RTGS system applies FIFO with Priority principle. The priorities range from 01 to 99. All
inter-bank funds transfers, either purely inter-bank funds transfers including for settlement of all
inter-bank financial markets’ transactions or of commercial banks’ customers, are assigned with
the priority level 99, which is defined as the normal payment, while the priority payments are
payments between the participating banks and Bank Indonesia for, such as, settlement of the net
figures from SKNBI, commercial banks’ cash withdrawals, settlement of Bank Indonesia
monetary operations, as well as payments of the government transactions in which accounts of the
government are held with Bank Indonesia accounting system.
3.2.4. Operating hours
BI-RTGS System operates in daily basis for working days and several non working days with
limited services. The operating hours are as follow:
Table 2: Operating hours of BI-RTGS system
14
PT Artajasa operating called “ATM Bersama” ATM switching whose members are 72 commercial banks
including 4 stated owned commercial banks, and PT Finnet Indonesia operating called “ATM Link” ATM
network whose members are only 4 stated owned commercial banks
15
It is ATM Bersama operated by PT. Artajasa
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