“To accommodate business model development and innovations in providing the payment services, the Indonesian government has reform of its payment system regulation to support economic and financial digitization.”
In Indonesia, the main authorities who hold jurisdiction over financial technology are the Bank of Indonesia and the Financial Services Authority (Otoritas Jasa Keuangan). Particularly for Payment Systems, Bank Indonesia issued Regulation No. 22/23/PBI/2020 of 2020 concerning Payment Systems (“PBI 22/2020”).
Payment Systems based PBI 22/2020 is a system that includes a set of rules, institutions, mechanisms, infrastructure, sources of funds for payments, and access to sources of funds for payments, which are used to carry out transfers of funds to fulfill an obligation arising from an economic activity.
Classification of Payment System Service Provider Companies
Under Article 5 PBI 22/2020, Payment service provider into 2 (two) sub-classifications, namely:
- Payment Services Providers (Penyedia Jasa Pembayaranor “PJP”); and
- Payment System Infrastructure Organizers (Penyelenggara Infrastruktur Sistem Pembayaranor PIP).
Referring to PBI 22/2020, the details of PJP and PIP is describe within the following table, which are:
PJP | Activities | Description |
Payment Initiation and/or Acquiring Services
| Activities that involved Forwarding payment transaction. | |
Remittance service activities
| Fund transfer activities in the form of acceptance and execution of fund transfer instruction in which the sources of funds do not originate from accounts administered by remittance service operators.
| |
Providing Information on Sources of Funds
| Activity of provision of information on sources of funds in the form of provision of information on sources of funds to initiate payment based on the approval of users.
| |
Administration of sources of fund
| Activities of administration of funds includes the administration of source of funds accounts and execution of payment transaction authorization.
| |
PIP
| Clearing | The Clearing Activity shall include activities of reconciling, confirming and calculating the financial rights and obligations of PIP members before the implementation of the Final Settlement. |
Final Settlement | The Final Settlement Activity is a final and binding settlement through debiting and crediting the parties’ accounts for the financial rights and obligations of PIP members based on the Clearing results. |
Compositions of Shares for Payment System Service Provider Companies
Pursuant to PBI 22/2020, foreign capital investment in PJP must only be in the maximum of 85% (eighty-five per cent) of the total shares while for PIP is capped at the maximum of 20% (twenty per cent). However, for PJP and PIP in a public company, the maximum percentage mentioned is only calculated upon 5% (five per cent) of the total amount of shares.
Furthermore, the PBI 22/2020 also mentioned the control aspects for the PJP and PIP. The share composition with the voting rights minimum of 51 % (fifty-one per cent) must be owned by the Indonesian individuals or Indonesian legal entity company for PJP Companies. While in PIP, share composition with the voting rights minimum of 80 % (eighty per cent) must be owned by the Indonesian individuals or Indonesian legal entity company.
Licensing Requirements for Payment System Service Provider Companies
Licensing requirements for PJP and PIP, shall stipulated in their respective regulations, for PJP it shall be regulated on Bank Indonesia Regulation Number 23/6/PBI/2021, while PIP it shall stipulate on Bank Indonesia Regulation Number 23/7/PBI/2021.
Under both regulation, Party applying for a license as a PJP and PIP shall:
- Comply with the mechanism and procedures for submitting a license application stipulated by Bank Indonesia;
- Conduct a self-assessment to fulfill the completeness of the licensing requirements document; and
- Submit licensing requirements documents related to licensing aspects requested by Bank Indonesia
Under both regulations, PJP and PIP must obtain a license and determination from the Bank of Indonesia before conducting its activities. The application must fulfill the requirements which consist of:
- Institutional aspect, which include legal entity legality, ownership, control and management;
- Capital and finance aspects, which includes minimum paid-up capital requirements, feasibility analysis, and business projections.
- Risk managements requirements, which includes legal risk, operational risk and liquidity risk; and
- Information system capabilities which includes security and reliability of information systems.
After obtaining the License and/or determination from Bank Indonesia, PJP or PIP Companies must conduct its business activities within the maximum of 120 (one hundred twenty) days after the approval. If the Payment Gateway Companies fail to conduct its business activities within the respective License shall be revoked.
Lastly, under Article 28 PBI 22/2020, Each party can only submit an application or have a permit or designation as one of the Payment System service providers. Therefore, companies cannot conduct activities of PJP and PIP collectively.
Author: Yohana Veronica Tanjung and Oddy Ramadhika Susmoyo
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Capital Market & Financial Services.
For further queries and information, contact us:
+62 21 2271 5060 | info@gaffarcolaw.com | www.gaffarcolaw.com
