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Credit card transactions to be made domestically
Bank Indonesia (BI) is developing a system which will allow credit card transactions to be processed at home with the hope that it will help reduce the current account deficit (CAD) and lower transaction fees
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ank Indonesia (BI) is developing a system which will allow credit card transactions to be processed at home with the hope that it will help reduce the current account deficit (CAD) and lower transaction fees.
In his remarks during the annual bankers' dinner on Thursday evening, BI Governor Agus Martowardojo said the central bank was in the process of establishing a national credit-card switching platform.
It is part of a bigger integrated payment infrastructure scheme to assist with the realization of the National Non-Cash Movement (GNNT), according to Agus.
Farida Peranginangin, director of BI's policy and payment system supervision department, said that BI expected to launch the platform in 2015. It would enable credit card transactions to be processed onshore.
'At present, they are processed overseas, even though the transactions are carried out in Indonesia. The current process follows the systems applied by existing credit card principals, such as Visa and MasterCard,' she said.
BI will be responsible for managing the platform's early operations, according to Farida. The operations will be handed over to an independent, non-profit organization in the following years.
'It may be in the form of an SRO [self-regulatory organization],' she added.
There are currently 8 million credit card holders and 15.8 million credit cards circulating in Indonesia. In terms of issuers, the number stands at 23, while the number of principals are five, consisting American Express, JCB, MasterCard, Visa and Union Pay.
As of September, the cards generated 187.64 million transactions, with a total value that reached
Rp 185.61 trillion (US$15.3 billion).
- BI in the process of establishing a national credit-card switching platform
- Platform will enable credit card transactions to be processed in Indonesia
- System will help reduce current account deficit
Data from the Indonesian Credit Card Association (AKKI) shows that about 80 percent of the transactions are performed in Indonesia and the remaining 20 percent are carried out overseas.
BI spokesperson Tirta Segara said that in a broader sense, domestic processing of the credit card transactions would help the country reduce its CAD.
'The processing is carried out by foreign firms. The higher the amount, the more it will affect our services balance,' he said.
Latest data on the services balance reveal that Indonesia posted a deficit of $2.5 billion in the third quarter of 2014 as many of the services are still provided by foreign firms.
In the financial sector, the services posted a deficit as well with $85 million, according to the data.
Tirta added that credit card transaction fees could hopefully be reduced when the new platform was in place.
Meanwhile, AKKI general manager, Steve Marta, said that the association welcomed BI's plan, adding that it was high time Indonesia had its own principal to process the transactions onshore.
'But what's important is making sure that the principal is a neutral organization that does not seek profits. There are many parties involved in the credit card industry and we need the organization to be neutral,' he said.
He also confirmed that fees could be substantially reduced after the domestic principal was created.
At the moment, the fee rate ranges between 1.8 percent and 2.5 percent per transaction. Proceeds from the fee will then be divided among several parties, such as principal and card issuer.
