5 things you need to know about Indonesia's payment market

Despite the optimism surrounding Indonesia's digital economy and the rise of online payments, the country is one where cash is still highly utilised and  traditional bank account penetration rate is at a low rate of 34%.

Indonesia is said to be the largest economy in ASEAN, with an expected Gross Domestic Product growth rate of 5.3% in 2020. To help Chinese payment companies expanding overseas gain a deeper understanding of the world's fourth most populous country, UnPAY and Tencent Research Institute have jointly published a whitepaper on Indonesia's payment market. According to the whitepaper, Indonesia is under the spotlight in the second of their "Venturing Out" series as it has one of the biggest untapped market for the digital payment and finance sector.

The whitepaper, written in Chinese, focuses on the hotspots and key issues of the payment system in Indonesia. They can be summed up as follows:

  • To operate in Indonesia, payment companies must have a comprehensive license access system, a regulation required by the Central Bank, Bank Indonesia, and Otoritas Jasa Keuangan, the two financial and payment transaction services authorities.

  • Payment services are categorised into front-end and back-end. The front-end body includes institutions that have direct contact with customers such as acquirers, payment gateway operators and electronic wallets. Conversely, back-end entities do not have direct contact with customers and these include card organisations, clearing houses and final settlement agencies. Applicants can only choose to operate in one category but they can apply  for multiple licenses in one category.

  • There are three main pillars of Indonesia's payment infrastructure: card payment, peer to peer and electronic money. Card payment facilities are limited to credit card, ATM card and debit card.

  • Under the electronic money quota management, unregistered users can store a maximum of 2 million rupiah while a registered user can have a wallet limit of 10 million rupiah. Electronic trading limit is 20 million rupiah per month. As of 21 December 2018, a total of 34 institutions in Indonesia had obtained e-money business licenses. Bigger players in the market include GoPay, T Cash, PayPro and OVO.

  • To ensure a more cohesive and consistent payment structure, the Central Bank, Bank Indonesia has established a National Payment Gateway to integrate the fragmented payment solutions. The GPN is a unified and interconnected clearing network that will unite all payment channels in Indonesia, including ATMs, POS, payment gateways and e-payment methods like credit and debit cards. In the pipeline, the Central Bank, Bank Indonesia will be developing a universal QR code payment standard for an interoperability and secure payments infrastructure.