UnPAY and Tencent Research Institute have jointly published a white paper on Indonesia's payment market with the aim of helping Chinese payment companies gain a deeper understanding as they expand overseas.

UnPAY and Tencent are have published a research paper in Mandarin that focus on hotspots and key issues of the payment system when expanding into Indonesia. The paper is the second of its «Venturing Out» series, aimed at helping Chinese payment companies gain a deeper understanding of the world's fourth most populous country, UnPAY said in a media statement.

The first white paper, which was published in October 2018, honed in on Singapore's payment infrastructure.

Regulations and Categories

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 (OJK), 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. In contrast, 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.

Three Main Pillars

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

PTP regulations oversee the purview of transfer or payment gateway services and e-wallet service providers. Currently, payment service providers (PSPs) are prohibited from using virtual currencies for PTP payments.

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. 

National Payment Gateway

To ensure a more cohesive and consistent payment structure, the Central Bank, Bank Indonesia has established a National Payment Gateway (GPN) to integrate 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.  

Largest Economy in ASEAN

Indonesia is the largest economy in ASEAN with a Gross Domestic Product (GDP) of $1.02 trillion in 2017 with GDP growth rate expected to reach 5.3 percent in 2020. Cash is still highly utilised while traditional bank account penetration rate is at a low rate of 34 percent.

Given the huge untapped market for mobile wallets, companies ranging from ride-hailing apps and telcos have raced to carve out a share of the region's payment pie. As of end-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.