Non-Cash Payment Transactions

Processing in Indonesia
Michael S. Carl
michaelcarl@ssek.com
September 2017
Types of Non-Cash Payment Transactions in Indonesia

Through Platform E-Payment

Through ATM & Using Proprietary Channel (SMS, USSD,
EDC/Physical Reader STK, web, mobile, e- wallet).
Using Credit Card, ATM Using Electronic Money
Card, Electronic Money Server Based.
Chip Based
Through Internet
Payment
Gateway (Virtual EDC)
Using CBP, Electronic
Money Server
Based.

SSEK
1 LEGAL CONSULTANTS 1
Non-Cash Payment Instruments
Electronic service to store data of
instrument for payment among
others CBP (card based payment)
and/or electronic money, which
can also store money, to conduct
payment.
License will be required if the
active user has reached at least
300,000 user.
Maximum fund that can be
stored in E-wallet IDR 10million.
Payment gateway enables merchants to
process payment transaction process with
payment tools that utilize cards, electronic
money and/or proprietary channel.
Payment gateway provider:
a. Transmits data on payment transaction
from merchant to Acquirer or Issuer
(facilitator); or
b. Transmits data on payment transaction
from merchant to Acquirer or Issuer and
payment settlement from Acquirer to
Issuer to merchant (merchant
aggregator).
SSEK LEGAL CONSULTANTS
Elements of e-money:
- Issued based on the value of the money deposited to
the issuer
- The value of the money is stored electronically in a media
server or chip
- Used as the payment instrument to merchants who are not
the issuers of such e-money
- The value of such e-money managed by the issuer shall not be
E-wallet E-money in the form of savings
Types of e-money
- Non-registered : value up to IDR 1million
- Registered : value up to IDR 10million
Monthly maximum transactions up to IDR20 million
Payment
E-money is distinct from “stored value “ which stands for
Gateway a non cash payment instrument, the value of which is
stored in one media yet partially or wholly not fulfilling
the elements of e-money .
E.g. Starbucks cards which can only be used to enter into
Virtual transactions at Starbucks.
Credit Card Currency
Payment System Providers are prohibited to process
payment transaction with a virtual currency obtained
through mining, purchase or rewards, e.g. Bitcoin,
E-wallet Blackcoin, Dash, Dogecoin, Litecoin.
Debit/ATM
Card
2
Regulatory Framework
Payment Transaction Processing

•Bank Indonesia (“BI”) Regulation No.18/40/PBI/2016 regarding Provision of Payment Transaction

Processing
•BI Circular Letter No.18/41/DKSP regarding Provision of Payment Transaction Processing

Card Based Payment Instrument

•BI Regulation No.11/11/PBI/2009 regarding Provision of Card Based Payment (“CBP”) Instrument
and its amendments
•BI Circular No. 11/10/DASP regarding Provision of Card Based Payment Instrument and its
amendments

E-Money

•BI Regulation No. 16/8/PBI/2014 regarding E-money and its amendments

Fund Transfer

•Law No. 3 of 2011 regarding Fund Transfer

•BI Regulation No. 14/23/PBI/2009 regarding Fund Transfer
•BI Circular Letter No. 15/23/DASP regarding Provisions of Fund Transfer

National Payment Gateway

•BI Regulation No.19/8/PBI/2017 regarding National Payment Gateway

SSEK LEGAL CONSULTANTS 43

Payment Transactions Process
Payment System Service Provider
Bank or other Non Bank Institutions that provide payment system service processing

Pre- Authorization Clearing Settlement Post Transaction

transaction

Initial transaction Approval on Payment Exchanging or Settlement activity Activities after the final
process to start the Transaction assimilating data that is final and settlement of a payment
payment and/or information in binding on financial transaction has been
transaction process terms of calculation rights and obligations conducted.
inter alia printing of of rights and on each implicated
cards, obligations between parties.
personalization of parties.
cards and supplying
of infrastructure.

Supporting Provider of Payment Transaction Processing

Parties that support the implementation of transaction payment processing

SSEK LEGAL CONSULTANTS 4

Payment System Service Providers
PAYMENT SYSTEM SERVICE PROVIDER
Bank Non-Bank Institution
PROCESSING
Issuer Principal Acquirer Clearing
Settlement
Provider
Fund Transfer Provider

Payment Gateway E-Wallet

Switching

SUPPORTING PROVIDERS
Printing & Personalization of cards, Safety Features
Providers, ATM/EDC Terminal Providers, Data
Center/Data Recovery Center Providers, etc.

SSEK LEGAL CONSULTANTS 5

Payment System Service Providers
Issuer
Banks or non-bank institutions which issue the CBP instrument
or e-money. The non-bank institutions that can issue a credit
card must be a financing company that obtained license from
the OJK to issue credit card. The non-bank institutions that can
issue a debit card and ATM card must have the authority to
collect public funds.
Clearing Provider
Banks or non-bank institutions carrying out the calculation of
financial rights and obligation of each of the Issuer and/or
Acquirer in CBP instruments or e-money.
Acquirer
Banks or non-bank institutions cooperating with merchants
which can process the CBP instruments or e-money data issued
by other parties.
Switching Provider
Bank or non-bank institutions providing infrastructures that
function as the center and/or connector of data for payment
transaction processing through network that utilize payment
method such as card, electronic card and/or fund transfer.
Electronic Wallet Provider
Bank or non-bank institutions providing electronic service to store data of instrument for payment, among others, CBP and/or
electronic money, which can also store money, to conduct payment.
SSEK LEGAL CONSULTANTS
Principal
Banks or non-bank institutions carrying out the principal CBP
instrument s or e-money, i.e. management of system and/or
network of its members (issuers and/or acquirers).
Final Settlement Provider
Banks or non-bank institutions carrying out final settlement of
the financial rights and obligations of each of the Issuer and/or
Acquirer in CBP instrument or e-money transactions based on
the calculation of the Clearing Provider.
Fund TransferProvider
Banks or non-bank institutions carrying out fund transfer
activities.
Payment Gateway Provider
Bank or non-bank institutions providing electronic service
that enables merchants to process payment transaction
process with payment tools that uses cards, electronic money
and/or proprietary channel.
6
 Licensing requirements

Every party that acts as Payment System Service

Provider is obligated to obtain a prior license from
Bank Indonesia.

SSEK LEGAL CONSULTANTS 7

Supporting Providers
In the payment transaction process, Payment
System Service Providers can cooperate with
Supporting Provider in order to support the
implementation of payment transaction
processing.
Payment System Service Provider may engage
Supporting Providers in all steps of payment
transaction processing.
SSEK LEGAL CONSULTANTS
Supporting Providers are among others:
• Provider of card Printing;
• Provider of personalization of payment;
• Provider of data center and/or disaster
recovery center;
• Provider of terminal among ATM, EDC,
and/or reader;
• Provider of safety features of payment
instrument and/or payment process;
• Provider of supporting technology for
contactless support;
• Provider of routing and supporting data
for payment transaction process.
8
Foreign Ownership Limitation
Parties that apply for a principal license for switching, clearing, and final settlement
must be in the form of a Limited Liability Company and whose shares are at least 80%
owned by:
1. Indonesian citizens; and/or
2. Indonesian legal entity.

Then the calculation for foreign ownership includes:

1. Direct ownership: counted based on 1 level of share ownership above prospective
Principal, Switching, Clearing and Final Settlement.
2. Indirect ownership: counted based on 2 level share ownership above prospective
for Principal, Switching, Clearing and Final Settlement.

The calculation of foreign ownership for public companies is only conducted for share
ownership with a percentage of 5% or more.
BI conducts supervision over the fulfillment of share ownership percentage.

SSEK LEGAL CONSULTANTS 9

Parties Involved in NPG
Standard Institution:
- Has the functions of preparing,
developing, and managing the Banks and non banks institution functioning as:
Standards (the formalized technical - Issuers;
and operational specifications) for - Acquires;
the interconnection and - Payment gateway providers;
interoperability of payment - Other parties stipulated by BI
instruments, payment channels, and
Switching, as well as security. Parties
- Must be an Indonesian legal entity
that obtain a stipulation from BI as Connected Parties connected to the NPG must be members
the Standard Institution to NPG of at least 2 (two) Switching Institutions, except
for instruments that can be interoperable without
going through a Switching Institution.
Switching institution: NPG
- Has the duty and function to Providers
process the payment transaction
data domestically for
interconnection and Parties connected with NPG shall comply with and
interoperability. implement the Standards established by BI and
- Must previously obtained a managed by the Standards Institution and shall also
license as switching provider from comply with the conditions set by the Services
BI; Institution.
- Must have a minimum paid up Virtual
capital of IDR50billion
Currency
Service Institution:
- Has the duty to ensure the security of payment transactions and the confidentiality of customer data; carry out reconciliation, clearing and
settlement, and developing systems for fraud prevention, risk management and risk mitigation; managing life cycle over secure access
E-wallet
module (SAM) and mobile apps; handling disputes over payment transactions in the framework of consumer protection
- Its shares must be jointly owned by Switching Institution and Commercial Bank based on Business Activity (BUKU) 4 (four) in which the
majority of its shares are owned by Indonesian citizens and/or Indonesia legal entities

SSEK LEGAL CONSULTANTS 10

National Payment Gateway (NPG)
NPG
shall be systems which consist of
standards, switchings, and
services which are constructed
through a set of regulations and
mechanisms (arrangements) to
A.
integrate various payment
instruments and channels
nationally.
SSEK LEGAL CONSULTANTS
b. the
interconnection and
interoperability of
payment channels in the
forms of ATM, electronic
data captured (EDC),
agents, payment
gateways, and other
NPG covers domestic
payment transactions
payment channels; and
which comprise:
interconnection
of Switching;
c. the
interoperability of
payment instruments in
the forms of ATM cards
and/or debit cards, credit
cards, electronic money,
and other payment
instruments
11
Challenges
Foreign ownership limitation.

Approval for the development of payment system business activity.

Domestic processing requirements for payment transactions using instruments issued by the issuers in Indonesia and
conducted in the territory of Indonesia.

Mandatory use of Rupiah.

De facto requirement to establish data center in Indonesia; unclear provision in the prevailing laws and regulation and
unclear enforcement.

With the issuance of NPG regulation, it creates uncertainty with regard to the role of a principal, clearing provider and
final settlement provider in the chain of payment transaction process.

Vague implementation of the recently-enacted NPG regulation in the absence of an implementing regulation.

SSEK LEGAL CONSULTANTS 12

 Mayapada Tower 14th Floor
Jl. Jend. Sudirman Kav. 28
Jakarta 12920

Phone 62 21 2953 2000, 5212038

Fax 62 21 5212039
Email ssek@ssek.com

www.ssek.com | blog.ssek.com | @SSEK_lawfirm