Friday, January 17, 2014

Indonesia- what happened to the regulations?

There was a lot of excitement in the Mobile Money industry when Bank Indonesia announced it would allow pilots of Branchless Banking in 2013 for five banks and three telcos.  There was considerably less excitement at the end of November when the pilots ended. 
The most common course of action after a regulatory pilot is either to extend the length of the pilot or issue regulations, but in this case BI declared that the pilot were closed and banks proceeded to close or suspend their agent operations.

Since then, there has been a shift in regulatory authority in Indonesia with the creation of OJK, the Financial Services Authority. They now have micro-prudential authority and thus would be the key regulatory body for Branchless Banking.  However, BI maintains control of the payments system and plans to issue regulations on Digital Financial Services as part of this authority.  The details of this are unclear, but it is expected that they will only allow “Book 4 Banks” (BRI, BNI, Mandiri and BCA) to participate, at least initially. BI has stated that other banks and non-banks may also participate in the future, but this is troubling news for banks such as BTPN, CIMB Niaga and Sinar Haparan Bali who participated in pilots but are now in regulatory limbo as to how to proceed.

These new regulations on Digital Financial Services (layanan keuangan digital or LKD) have not yet been released but are being keenly anticipated by all involved.



  1. Hope all pilot banks and others awaiting regulatory approvals are allowed to continue providing DFS:

    - Banks invested heavily during the last 18 months for platforms; staff capacity building, setting up their agent network, marketing etc.
    - Customers who signed up for DFS will loose confidence if the service is discontinued or suspended. Building customer confidence again will take time and will cost a lot of money.

    Let’s hope the regulators will send a positive signal to implement DFS in Indonesia.

    Michael, keep us posted.

  2. It frustrates me watching stories like this evolve. Just like the RBI in India, BI seems determined to slow the possibility of inclusive financial services. But it's encouraging to know industry leaders like yourself remain engaged in driving success. Do reach out if you ever need any help


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