B

ank Indonesia (BI) issued on Wednesday the much awaited revision to its regulation on electronic money, paving the way for more providers to engage in the business and wider array of services to be offered to financially illiterate people.

BI deputy governor Ronald Waas said the central bank'€™s new regulation No. 16/8/PBI/2014, a revision to regulation No. 11/12/PBI/2009, would in particular, provide easier money transfers through mobile devices, tighter customer protection, and more outlets for customers to cash in their e-money.

'€œThe policy will allow more providers to engage in the service, and help business owners and farmers without bank accounts to gain access to financial services,'€ Ronald said.

He also said that the regulation would also strengthen the legal basis for existing and future e-money transaction providers as well as ensuring the security of transactions.

Currently, the are only eight banks, one regional bank and eight non-banking institutions, such as telecommunications operators, which have licenses to provide e-money and digital transaction services.

Under the new regulation, any non-banking institution or individual can apply for the licenses from BI.

BI executive director for payment system policy and supervision Rosmaya Hadi said that the policy would not only support the branchless banking projects carried out last year by several big banks, but would also create a new business model.

Rosmaya cited an example in which a farmer who has no bank account but has a cell phone could receive an e-money transfer through his or her cell phone, and cash in the money in a nearby pawnshop, post office or a licensed agent.

If the farmer does not have a cell phone, he or she can receive the transfer through an appointed agent who has a cell phone, she explained. '€œThe agent can also function as a walking ATM where he or she can receive and dispense the money,'€ said Rosmaya.

The need for branchless banking and e-money transactions are huge as a recent survey by the International Finance Corporation (IFC) shows that among the country'€™s traditional retailers, which generate about US$137 billion sales annually, only 31 percent of which are financially literate.

The research suggests the retailers are immune to fast-growing e-money transactions, as only 1 percent of respondents are using e-payment services with suppliers, despite another 39 percent saying they are interested in digital transactions.

BI data also revealed that e-money usage still had room to expand, given its small transaction value last year.

Total transactions involving e-money only topped Rp 8 billion (US$7 million) per day in 2013, up by 60 percent from Rp 5 billion in the previous year.

In contrast, BI data shows that daily average debit card-based transactions amounted to Rp 10 trillion last year, up from Rp 8 trillion per day in 2012.

Bank Danamon president director Henry Ho said that the bank would soon introduce a digital money application in order to tap into the huge demand. '€œThis year we should be introducing something in the second quarter,'€ he said.