Talk about digital payment in Indonesia - Cashless society

1. ROLLING OUT DIGITAL PAYMENT PLATFORMS -
An Indonesian Perspective
Heru Sutadi
17th Annual Cards & Payments Asia
25 – 27th April 2012
Singapore

2. 2
ICT STATISTICS
Until the end 2011, the status of ICT infrastructure and services
are as follows:
Fixed line subscribers (PSTN): 8.328.180 subs
(3.49 %)
Fixed Wireless Access: 32.819.564 subs
(13.81 %)
Mobile: 213.256.931 subs
(89.79 %)
Internet users: 72 Millions
(30,31 %)

3. Digital Money
 Mobile financial services was first
implemented in 2001 by Mobipay in
Spain, while mobile banking service has
been given for years in some countries
 Mobile money becomes the focus of
attention because of this phenomenon a
success in several developing countries
 Predicted until the end of 2013 more than
424 million mobile phone users will send
money to other mobile phone users in the
same country and 73 million will be
sending money to another country
 There are three main types of financial
services: mobile money transfer, mobile
banking and mobile payment

4. CURRENT MARKET CHALLENGES
 Although the market is well established,
there are a number of barriers currently
restricting it from reaching its full potential
and fulfilling the basic consumer needs:
 Access
 Security
 Cost
 Regulation.

5. BUSINESS MODELS

6. IMPLEMENTATION
 Compared to the bearer business model, mobile
operators who want to cooperate with financial
institutions whilst being present at the customer
interface (cash in/out) are more dependent on the
regulatory environment of their respective country.
 If the agency rules prevent them to handle cash
and undertake the customer due diligence
procedures for AML/CFT prevention, then they may
not be able to choose the business models.

7. FINANCIAL REGULATION
 The first level of financial regulation is AML/CFT
compliance, which generally becomes applicable when
the mobile operator becomes involved in cash handling
at the consumer interface.
 The next level of regulation applying to mobile
operators is prudential regulation. Prudential regulation
becomes applicable when risks increase for the
involvement of the mobile operator in the financial
transaction, for consumers and for the wider financial
system.

8. PRUDENTIAL REGULATION
 Prudential regulation ensures that regulated entities are
financially sound and promotes their prudent behavior.
 The key aim of prudential regulation is protecting the
interests of consumers and the quality of an institution’s
systems for identifying, measuring and managing the
various risks in its business.
 Prudential regulation can apply in various measures
depending on the risks.

9. MOBILE OPERATOR PERSPECTIVE
 From a mobile operator perspective following thresholds
of prudential rules depending on the risks involved seem
useful:
 Payment regulation (low risk – light prudential rules)
 E-money (medium risk – medium heavy prudential rules)
 Deposit taking, i.e. banking (high risk – heavy prudential rules)
 However much such a risk-based approach would be
desired, it is not the rule, and in many countries
banking regulation applies to the majority of financial
services offered independently of the risks involved.

10. BENEFIT TO MOBILE OPERATOR
 New customer acquisition (individual, corporate)
 Non-traditional Telco revenues
 Transaction fees
 Share of Forex spread
 Finders/consumer sign-up fees
 Future m-banking revenue (e.g. utility bill payments)
 Increase in ARPU
 Reduced churn (e.g. one operator reduced churn from
3% to 0.5% per month)
 Meets government service obligations and CSR Agendas
 Opportunity to up-sell (e.g. mobile content, prepaid to
post paid)

11. MOBILE OPERATOR SITUATIONS
From a mobile operator perspective agency rules
become relevant with regard to two situations:
2. Can the mobile operator become an agent?
• Becoming an agent allows the mobile operator to use its
own distribution chain to accept/disburse cash at both
ends of the MMT service.
3. Can a mobile operator operating a payment
service or e-money use other retailers as agents
for MMT services?

12. DIGITAL
WAVES
Telekomunikasi Entertainment Financial Services
Telecommunication Broadcasting
Game
Voice Music TV
Cable TV
Internet VOD
Satellite TV
Penyiaran
IP-TV Interactive TV
DIGITAL
Mobile services
ANALOG
Internet / Multimedia
RUU
Konvergensi
Telematika
UU 36/199
Telekomunikasi
RUU
perubahan
Penyiaran
UU 32/2002
Penyiaran
RUU
perubahan
ITE
UU 11/2008
ITE Regulatory old model RUU
TIPITI
Regulatory new model
Old Law & Regulatory
ICT Act & Reg New Law & Regulatory

13. Toward a Less cash society
Grand design
 E money – prepaid card as stated at the PBI no
7/52/PBI/2005 concerning the Card Payment
Instrument Operational Activity
 Definition:
 Prepaid product /e-money : stored-value or prepaid
products in which a record of the funds or value available
to a consumer is stored on an electronic device in the
consumer’s possesion
 Access Product (debet card and credit card)
PBI : Peraturan Bank Indonesia / Indonesia Central Bank Rule

14. DIGITAL MONEY IN INDONESIA
Some operators provide M-Money services:
 International remittances which are targeted by
Indonesian workers who were working in foreign
countries who wish to transfer money to families in
Indonesia
 Mobile banking services. Some banks have been
working with telco operators to include this services as
basic services commensurate with the services
ringtones, wallpapers or service information and content
 Payments also begin to move since taking over two
years ago, with the term e-wallet.

15. Telco Co

16. CASE STUDY (1)
Telkomsel Cash User (t-cash)
630,287
800,000 728,171
604,754
600,000
482,236
503,267 531,557
400,000 348,587
513,511
112,076
200,000 103,709 108,898
104,935
-

17. CASE STUDY (2)
Merchant Category %
Retail 94.0% Features :
Fashion/ Life style 1.2%
Bill Payment 0.1%
3.Cash in
Education & University 0.4%
Food and beverage 0.8% 4.Purchase
Insurance 0.0% 5.Online Purchase
Portal 0.1% 6.Bill Payment
Cellular Shop 0.5% 7.P2P Transfer
Telkomsel Channel 1.1% 8.Cash Out
Others 1.6%
Number of partners : over 150 companies

18. E-CHANNEL GROWTH
TECHNOLOGY TREND

19. INTERNET BANKING TRX VOLUME
BNI Credit Card Non BNI Credit
Transfer Payment Card Payment
2009 7.471.188.170,0 126.366.829,8 95.067.169,9
2008
2007
4.129.695.799,0
990.027.501,4
76.388.869,6
18.488.879,3 INTERNET BANKING TRX
59.453.536,3
9.690.978,3
INTERNET BANKING TRX
VOLUME - 1
BNI Credit Card Non BNI Credit
Transfer Payment Card Payment
2009 1.612.093,0 68.617,0 44.574,0
2008 978.219,0 43.981,0 31.224,0
2007 276.995,0 14.835,0 6.644,0
Source : BNI 46

20. 0 INTER BANK e – banking Map in Indonesia
Bank / ATM Internet SMS Banking Mobile Phone Banking
E- Banking Banking
channel
BNI BNI ATM BNI Internet BNI SMS Banking In construction BNI Phone Plus
Banking
BCA ATM BCA KLIK BCA SMS BCA M BCA BCA By Phone
MANDIRI MANDIRI ATM MANDIRI Internet MANDIRI SMS - MANDIRI Call
Banking Banking
BRI BRI ATM BRI Internet BRI SMS BRI Mobile BRI Call
Banking Banking Banking
DANAMON ATM DANAMON DANAMON - DANAMON DANAMON Acces
On Line Banking Mobile Banking Center
CIMB- ATM NIAGA Internet Banking - - NIAGA Call Center
NIAGA NIAGA
BII ATM BII Internet Banking - - NIAGA Call Center
BII
PERMATA PERMATA ATM PERMATANET PERMATA PERMATA PERMATATEL
PERMATA Mini ATM Mobile Mobile
E – banking transaction Juny 2009 –
MANDIRI BCA BNI
e-Channel
2010 in Indonesia
Transaction 2009 2010 2009 2010 2009 2010
INTERNET BANKING
> VOL TRX ( Million) 6.1 26.6 97.5 177.7 0.84 1.2
> VALUE TRX ( IDR Trillion) 3.8 8.7 591.0 873.0 3.5 5.1
ATM
> VOL TRX ( Million) 122.9 141.9 412.8 436.2 - 166.2
> VALUE TRX ( IDR Trillion) 77.1 97.1 412.0 447.7 - 85.4
SMS/MOBILE BANKING
> VOL TRX ( Million) 33.5 41.7 54 77.6 10.5 18.3
> VALUE TRX ( IDR Trillion) 1.3 2.6 59.2 90.6 0.787 1.5
Source : Infobank Sep 2010

21. minal “Payment “ of the Internet Banking 2007 - 2009 - BNI
Telkomsel PLN Education
Telkom (Post Paid) Indosat Excelkomindo (Electricity) Airline Ticket Cost Personal Loan Zakat
729.644.936,0 421.524.575,0 796.962.399,0
2009 3.489.261,55 4.544.277,77 0 0 0 61.137.694,40 7.590.733,00 5.177.783,10 1.240.800,56 2007 2008 2009
441.173.157,0 374.963.564,0 955.911.667,0
2008 2.465.020,92 2.548.235,43 0 0 0 53.025.113,30 3.061.011,36 690.807,14 2.645.025,00
186.424.495,0 351.179.601,0
2007 764.322,37 852.943,58 0 66.016.179,00 0 4.406.045,00 309.005,24 36.863,72
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Telkom Telkoms Indosat Exelcomi PLN Tiket Biaya Personal ZIS dan
el (Halo) ndo Penerba Pendidik Loan Qurban
2009 20.589 24.848 3.664 2.209 3.445 ngan
21.840 an
40 4.389 4.021
2008 14.101 13.535 2.399 2.299 4.880 12.818 3.365 2.369 46.729
2007 4.290 4.036 750 393 1.777 915 - 376 216

22. Nominal “Purchasing Voucher”
“Purchasing Voucher” Transactio
Telkomsel - AS Indosat - IM3 Excelkomindo Mobile 8 -Fren 3 Three Flexi / Esia
2009 1.907.702.858 673.950.000 794.800.000 110.050.000 31.270.000 501.100.000
2008 1.190.650.000 422.950.000 523.165.000 77.000.000 18.110.000 413.150.000
2007 776.121.102 - - - - -
Telkomsel - AS Indosat - IM3 Excelkomindo Mobile 8 -Fren 3 Three Flexi / Esia
2009 27.962 8.388 15.287 2.128 741 12.834
2008 17.811 6.664 9.821 1.304 463 10.676
2007 12.440 - - - - -
Source : BNI

23. LAW AND REGULATION
There are several law and regulation that must be
consider to provide M-Money services:
 Law No. 11/2008 about Information and Electronic
Transaction
 Law No. 10/1998 about Banking
 Law No. 25/2003 about Anti Money Laundering
(including Combating Financing of Terrorism)
 Indonesian Central Bank Decree No. 11/2009 about E-
Money.

24. Bank Indonesia Regulation no 11/12/PBI/2009 concerning
Electronic Money
 Bank or Non Bank Institution has to obtain the license from Bank Indonesia as
Principal, Issuer, Acquiere, Clearing Procsessor and /or End Settlement Processor
 Entity Legal Form :Non Bank institution shall be incorporated as Limited Company
that abides to the Laws of Indonesia.
 Currency Usage must be Indonesian Rupiah
 Enhancement of security Technology : Utilizes a reliable and secure system,
Maintain and enhances Electronic Money security Technology, Possesses written
standard operating procedures pertaining e-money activity, Maintain the security
and confidentiality of the data.
 The Limit of e-money :
 Rp 1,000,000.- for unregistred type of customers
 Rp 5,000,000.- for registered type of customers
The value of the e-money must equal with the deposit value.

25. Conclusion
 The trend of digital money in Indonesia is increasing
significantly recently. It means that this kind of business is
very attractive in the very near future
 The Licence is granted by Bank Indonesia to Bank and Non
Bank institution to be a Principal, an Issuer, an Acquiere, a
Clearing Processor and /or an End Settlement Processor
 The ICT infrastructure as well as the Broadband Backbone
and Broadband Access is seriosly planned by the Indonesia
Government to facilitate in implementing the digital money
especially m-money.

26. Thank you
for your attention…
Heru Sutadi
Email: heru@brti.or.id