INDONESIA: Enhancing Payment Systems’ Interoperability and Removing Legal and Regulatory Restrictions to Accelerate Financial Access

INDONESIA: Enhancing Payment Systems’ Interoperability and Removing Legal and Regulatory Restrictions to Accelerate Financial Access


The rapid growth of retail payment transactions and large remittance inflows into Indonesia created challenges for the country’s payment systems. In addition, institutional changes made with the establishment of the Indonesia Financial Services Authority, which has taken over the responsibility of regulating and supervising banks, put a clear mandate and authority for Bank Indonesia as the overseer of the payment systems, including nonbank remittance service providers. The lack of system interoperability and a conducive legal and regulatory framework constrained the introduction and uptake of innovative financial products, which proved to play a big role in the financial inclusion agenda. Indeed, data from Global Findex Surveys showed that the percentage of adults with a transaction account in Indonesia was just 20 percent, compared with the East Asia and Pacific regional average (developing countries only) of 55 percent in 2011, and 36 percent compared with 68 percent in 2014. 


In 2012, Bank Indonesia sought FIRST's technical assistance (TA) to develop a suitable legal, regulatory, and oversight framework in order to enhance the efficiency of the payment systems and support implementation of the country’s National Strategy for Financial Inclusion.

FIRST’s project, Improving Payments Systems Oversight, carried out during July 2012–June 2014, has provided Bank Indonesia with policy recommendations on the following aspects:

  • The legal and regulatory framework for payment systems, including a technical note on key elements for a Payments and Settlement Systems Act and draft legislative provisions.
  • Advice on the payment systems oversight framework, the Principles for Financial Markets Infrastructures, and the role of the Central Bank in payment systems oversight.
  • Advice on e-money standardization and the development of the National Payment Gateway (NPG), which would unite the processing of ATM, mobile, Internet banking into one interface.
  • Assessment and recommendations on developing the remittance market against the CPSS-World Bank General Principles for International Remittance Services.

Bank Indonesia acknowledged the usefulness of the TA in its feedback to FIRST. According to A. Donanto H. Wibowo, assistant director at Bank Indonesia: 

The TA is very valuable to improve our capacity as payment system authority…. We found that experience sharing (and discussion) between consultants, us (authority) and the industry which took place in World Bank Jakarta [was most useful for us]. This specific event has broadened our perspective on the National Payment Gateway establishment as something that [is] achievable. And through this NPG, Indonesia’s bargaining position indeed would significantly improve in the world of payments systems.


Since completion of the TA, Bank Indonesia has achieved a number of tangible outcomes, including the following:

  • Issuance of Bank Indonesia Regulation on Fund Transfers, Bank Indonesia Circular on Fund Transfers, and Bank Indonesia Regulation on E-money.
  • Improved payment systems oversight.
  • Decision to implement the NPG, which would make every transaction, both debit and credit, using any payment method (ATM, mobile, Internet) within or outside the country united on the NPG interface, thus increasing security and transaction ease, and lowering costs (due to the connected network and global cooperation).
  • A ban on exclusivity agreements in the remittance market, which could open up the market for more competition and thus reduce the costs for users.

This TA project led to follow-up requests for continued assistance from the World Bank’s Payment Systems Development Group (PSDG) to Bank Indonesia and expanded support to the government for shifting to electronic payments. The World Bank PSDG has responded to the request with larger interventions, with financial support from the Gates Foundation ($4.3 million) under the Financial Inclusion Support Framework.

During FIRST’s recent Consultative Group meeting in Morocco, Farida Peranginangin, director, Payment Systems Policy and Oversight, Central Bank of Indonesia, shared with the participants that:

Bank Indonesia has received TA from FIRST in payment systems. We believe that payment systems is a catalyst for financial inclusion development. We have seen that the FIRST program was beneficial for us in reforming our legal and regulatory environment, as well as developed our capacity in oversight. In payment systems, for example, we have been fulfilling some drawbacks that the FSAP has identified. And also, we have developed some regulations.