Possible business applications

Future policies and regulations governing interlinks between non-banks and banks (including in the payments space)

The continuous growth and interconnectedness among banks, non-banks (such as payment service providers, finance companies, and insurance companies), and non-financial service providers (like e-commerce, ride-hailing, gaming) necessitate a heightened emphasis and diligence in defining the roles and responsibilities of these players. This is crucial from both an affiliation/ownership standpoint and a business collaboration perspective.

Business models are becoming increasingly modular, leading to a wide array of entities involved in a single payment service. Looking ahead, we anticipate the establishment of policies and regulations that set minimum standards or prerequisites for risk management purposes. These would include the clear identification of the entity that would be held accountable in the event of risk realization. There could be enhanced supervision of the entities involved in such collaborations. This might involve stricter regulatory oversight and the implementation of robust consumer protection measures.

Future policies and regulations on licensing and development approvals which are shaped pursuant to market contribution and risk management

It is anticipated that Bank Indonesia will establish criteria such as size, interconnectedness, competence, IT infrastructure, complexity, and substitutability to evaluate the market contribution and risk management of payment service providers. These standards could guide Bank Indonesia's level of examination and oversight when setting licensing requirements or evaluating proposals for new product or activity development approvals.

The initiatives under the 2030 Blueprint

To achieve the 2030 visions of payment system and also support the above business applications, the 2030 Blueprint covers five initiatives:

Infrastructure

Focusing on creating a resilient and integrated digital financial infrastructure by, among other things:

• Enhancing the stability, scalability, and synergy of retail payment systems
• Developing the "BI-Payment Clear" system to bolster risk management and ensure transaction integrity
• Building robust data infrastructure through the implementation of Payment ID (which will be developed as a unique identifier to optimize granular financial transaction data), data capturing systems, and "BI-Payment Info" (a public digital infrastructure that provides an API (application programming interface) for processing granular financial transaction data (data-as-a-services)

Industry

An industry that gets stronger by matching access and entry rules to the risk levels of participants, improving risk management, and updating regulations. This helps the industry control risks better and stay competitive.

Building upon the visions outlined in the 2025 Blueprint, the 2030 Blueprint aims to oversee digital technologies like APIs, foster business partnerships, and regulate the ownership of participants in the payment system. This is done with the goal of reducing the potential risks associated with shadow banking and ensuring a robust connection between fintech and traditional banking institutions.

Innovation

BI's commitment to fostering innovation is balanced with a focus on consumer protection, integrity, stability, and healthy business competition through collaboration. This objective will be realized through strategic policy measures, including: (i) promoting innovation in payment services, highlighted by the establishment of the Bank Indonesia Digital Innovation Center, and (ii) reinforcing consumer protection measures.

International

Enhancing cross-border payment connectivity while safeguarding national interests by broadening the scope of QRIS cooperation between countries and interconnecting both retail and wholesale payment systems.

Digital Rupiah

In 2024, Bank Indonesia successfully completed Phase 1 of the development, which involved the use of wholesale Digital Rupiah for various functions such as issuance, destruction, and fund transfers between parties. Looking ahead to Phase 2, the focus will shift towards enhancing capabilities through experimentation with digital securities, targeting a range of financial market use cases.

* We want to thank Johan Kurnia, Senior Associate at HHP Law Firm, for his contribution to this alert.

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