B

ank Indonesia (BI) has reaffirmed its commitment to a long-delayed master plan for an integrated payment system, called the National Payment Gateway (NPG), as part of the central bank'€™s drive to reduce cash transactions and boost efficiency.

BI deputy governor Ronald Waas said the road map for the NPG, which was expected to be completed next year, would focus on building interoperability between local interbank network providers, also known as switching companies, to support the rise of electronic payments.

The implementation of the payment gateway scheme, which has been postponed since 2012, will pave the way for the establishment of a central institution overseeing interconnectivity of all electronic payments through various tools, including debit and credit cards as well as e-money, Ronald said.

'€œBI supports the establishment of a domestic principal that will create interoperability between switching companies,'€ he said recently, adding that the payment gateway scheme would become the main infrastructure for financial services and payments.

Ronald said the master plan would support the country'€™s giant payment system that was expanding each day, as indicated by BI'€™s national clearing transactions, which already reached a daily average of Rp 13 trillion (US$934.5 million), not to mention the massive volume of non-clearing and e-commerce payments.

Currently, Indonesia has four switching companies that provide a network for e-banking payments, namely Artajasa Pembayaran Elektronis (ATM Bersama), Rintis Sejahtera (ATM Prima), Daya Network Lestari (ATM ALTO) and Sigma Cipta Caraka (ATM Link), which is a second-tier subsidiary of state-owned telecommunications firm Telkom.

Under the central bank'€™s support, all four switching companies agreed to enable interoperability with each other in 2013 with certain fees charged on customers of different banks. However, the implementation is still limited.

Prior to the 2013 agreement, customers of two different banks, for instance Bank Mandiri and Bank Central Asia (BCA), were unable to transfer money through each other'€™s ATMs due to a lack of interoperability between ATM Bersama and ATM Prima, which served Mandiri and BCA, respectively.

Hermawan Tjandra, senior vice president of marketing at Rintis Sejahtera, said his company had yet to receive further details on BI'€™s new scheme on ATM interoperability, although he welcomed the plan, as the national gateway was expected to include electronic payments beyond ATM transfers and debit cards.

'€œI think there will be a single standard for wider electronic payments that will also able to inter-operate, including in online or digital fields,'€ he said.

In order to make the national payment gateway successful, Hermawan said the central bank might need to enhance its regulations on payment systems and focus on establishing a national standard under the scheme, just like the National Standard of Indonesian Chip Card Specification (NSICCS) that requires chip-equipped debit cards in the future.

Technical issues in the debit card standard implementation have forced BI to extend the deadline stipulated in the 2014 central bank regulation, which required all debit cards issued by local banks to use the NSICCS standard beginning next year.

Ronald previously said BI'€™s evaluation showed that the migration from current technology would require more time, so that the central bank was revising the rule that required all existing ATM and debit cards with the magnetic stripe technology to be withdrawn and replaced with new ones by Dec. 31 this year.

There are roughly 119 million debit and ATM cards circulating in the country today, making a wide-scale migration into chip-equipped cards a daunting task, while about 97,000 ATMs and 1 million electronic data capture (EDC) units must also be upgraded to accommodate the new cards.

Despite fully supporting the national payment scheme, Bank Mandiri senior executive vice president for transaction banking Rico Usthavia Frans said the process was running somewhat reversed from what he had expected, as BI already implemented the NSICCS for debit cards, while the national principal had yet to be established.

'€œThe ideal way for the national gateway scheme is to first build a domestic principal entity as the highest institution for national payments, then the national standard for debit cards,'€ he said, adding that there was a stagnant discussion between BI and payment industry players on who would become the domestic principal.

Rico, who is also secretary-general to the Association of Payment Systems in Indonesia (ASPI), said the domestic principal was also expected to oversee credit cards, whose transaction settlements were still managed overseas through foreign principals until now, even though most credit card transactions stayed within the country'€™s borders.

Rico suggested that the future domestic principal should be a national entity whose shares were owned by the state, institutional members and the public.

Rico pointed out China UnionPay (CUP), the only domestic bank card organization that links all ATMs in mainland China and was widely accepted by the ATMs in Hong Kong and Macau, as the best practice from abroad that could serve as a model for the future domestic principal in Indonesia.

'€œThe domestic principal will be overseeing a number of switching companies that it either owns itself, like CUP, Visa and MasterCard do, or open itself to oversee those firms that exist now, but still under a single standard,'€ he said.