Bank Indonesia yesterday announced the release of long-awaited new rules on electronic money . Since the termination of the Branchless Banking pilots in 2013, and the subsequent shift in regulatory authority to the newly formed Financial Services Authority (OJK), banks and telcos alike have been waiting for news on how they can use e-money and alternative financial services to reach the huge population of financially excluded in Indonesia.
Although the new rules don’t cover the extension of bank accounts through agents, they do provide much-needed clarity and consolidation of existing e-money regulations. E-money has been growing in Indonesia, but so far the majority of transactions are of closed-loop card-based transactions, especially for public transport and toll roads. The extension of financial services to rural and underserved populations has not yet eventuated, largely due to onerous requirements on the ability to cash-out or withdraw funds.
The new regulations have a multi-tier approach to appointing agents for cashing out. There is good news for the Book 4 banks (BNI, Mandiri, BRI, BCA) in that they can appoint individuals as agents to provide a wide variety of services for e-money. The news is not so good for other e-money issuers, including smaller banks and telcos, in that their agents must be incorporated legal entities. This will prove frustrating in a country where the majority of businesses lack formal registration, especially as these small businesses have proven to be the best agents in other markets.
However, other components of the regulation are more progressive. Agent exclusivity is forbidden, which is seen as an important step in working towards an interoperable and universally accessible system. Service providers will also be able to determine their own fees, although BI has retained the ability to cap these if needed.
The new regulations are available in Bahasa Indonesia only http://www.bi.go.id/id/peraturan/sistem-pembayaran/Default.aspx. I will post more details on this blog once I have a translation, and welcome any questions or discussions.
Michael Joyce is a policy advisor working with the Government of Indonesia on mobile money and financial inclusion. He has been working on mobile money in Asia for six years, specialising in risk, regulation and operations. The views on this blog are his own and do not represent the views of the Government of Indonesia or constitute legal advice.