Held in hybrid format on March 15 as part of the Business Forum series at the Bank Indonesia Special Week Expo 2020 Dubai, the webinar discussion also underscored the importance of synergy and collaboration in taking collective actions to transform the digital landscape, and that this was crucial for achieving global economic recovery.

Bank Indonesia Deputy Governor Doni Primanto Joewono said in his keynote speech that the ability to survive, adapt and transform would be the key to success in outriding the pandemic successfully. Digital acceleration is expected to be a game changer [for businesses] to thrive amid the restrictions on social mobility.

He also noted that the digital era was inevitable and that it had colored the payments ecosystem. “Shorter technology cycles have become a challenge for regulators in keeping abreast of developments amid the variety, innovation and complexity of payment systems.”

In response to these conditions, regulators needed to be proactive in encouraging technological innovation and development toward increasing productivity, efficiency and inclusion.

On the other hand, Doni cautioned, regulators also needed to be aware of the potential challenges and risks, so a balanced approach to innovation and mitigation had been laid out in the central bank’s Indonesia Payment System Blueprint 2025 (BSPI 2025).

The implementation stage of the five visions of the IPS Blueprint 2025 is cascaded into five initiatives, that are: (i) Developing Open Banking. This initiative will be achieved through open API standardization in payments; (ii) Strengthening the Configuration of Retail Payment Systems. This initiative will be achieved through the development of the BI-FAST infrastructure that supports the availability of payment services in real time, seamlessly, 24/7 and securely. (iii) Strengthening Financial Market Infrastructure (FMI). This initiative will be achieved through modernizing the infrastructure and strengthening the regulatory framework for FMIs. (iv) Developing Public Infrastructure for Data. This initiative will be achieved through the provision of public infrastructure for data management. (v) Strengthening the Regulatory, Licensing and Supervisory Environment. This initiative will be achieved through strengthening the regulatory and supervisory framework of payment systems.

In 2021, there were at least three important milestones for the IPS Blueprint 2025. First, regulatory reform. BI  issued four regulations related to payment systems, namely the BI Regulation on payment systems, the BI Regulation on payment service providers, the BI Regulation on payment infrastructure organization and the BI Regulation on payment system national standards.

Second, retail payment system infrastructure. Developing the BI-FAST infrastructure, a national infrastructure to create a consolidated national payment system based on the 3i principles (integrated, interoperable and interconnected) aligned with a foresight payment system policy.

Third, payment system standards.  (i) BI issued a regulation on the National Standard Open API Payment (SNAP) in August 2021. SNAP is expected to promote integration, interconnectivity, interoperability, security and reliability in the payment system infrastructure, as well as reducing industry fragmentation and simultaneously accelerating financial and economic digitalization. (ii)  The Quick Response Code Indonesian Standard (QRIS), an accelerator for establishing the digital economy and finance ecosystem, encouraging interlinking among banks and fintech institutions, and supporting the development of small and medium enterprises (SMEs).

Puji Gunawan, the Assistant Deputy Minister for Regional Economy and Real Sector at the Coordinating Ministry for Economic Affairs, said that in line with the financial pillar of Indonesia’s G20 presidency, digital transformation would play a significant role in enabling the country to grow in a sustainable manner, especially in the regions.

“A 2020 study showed an increase in [economic] contributions of between 11 percent and 14 percent in terms of regional transactions,” Puji noted.

Fitria Irmi Triswati, Director of Payment System Policy Department of Bank Indonesia, said that digitalization was the key to economic recovery.

“On the supply side, digitalization is currently allowing and facilitating economic activities amid limited mobility, and this has led to a form of market structure.”

Both the digital and financial economies would continue to play an important role in recovery, she said, as they would “form digital and financial markets comprised of a number of big and small players”.

On the demand side, financial hardships during the pandemic had led to change in consumer behavior, with an increased preference for e-commerce. “So, the limited mobility caused by the COVID-19 pandemic has had an impact on economic practices to drive digital transformation,” she said.

According to BI data, digital banking channels grew 56.7 percent year on year (yoy) in 2021, showing that digital transformation was ongoing in the banking industry.

The data also showed that e-commerce growth surged 71.3 percent (yoy) over the same period.

Meanwhile, Vincent Henry Iswaratioso, the Treasurer of the Indonesian Payment System Association (ASPI), pointed out that digitalization had been growing significantly over the last two years, thanks to support from BI and the payments industry.

Indonesia’s digital transformation was one of the fastest in the region and probably in the world, he added. “This is really the fruitful result of the collaboration between industries, associations and regulators.”

Vincent said that the dual issues of data privacy and “cyberattacks” were “very important, especially in the real world where data moves in real time.

Digitalizing MSMEs

Meanwhile, Fitria highlighted the importance of digitalizing micro, small and medium enterprises (MSMEs), as they played a significant role in recovering the economy.BI provided virtual training programs to improve digital literacy among MSMEs and help them exploit the e-commerce boom.

Meanwhile, the central bank was accelerating QRIS development to enable interconnectivity between banks and financial technology companies toward contributing to MSME development. She said current features included merchant presented mode (MPM) and customer presented mode (CPM) so both merchants and customers could generate QR codes for small transactions.

BI’s latest QRIS innovation was the QR cross-border payment facility, developed in collaboration with the central banks of Thailand and Malaysia. Through this reciprocal facility, Indonesian tourists can use their mobile phones to scan the QR codes issued in Thailand and Malaysia to make payments to local merchants, while Thai and Malaysian tourists could also use the facility when visiting Indonesia.

Bank Indonesia’s policies on digital payment systems involved collective, innovative and collaborative actions that were needed to confront these adverse and uncertain times. “In this case, digital transformation and synergy between industry players and regulators is the key to [overcoming] the pandemic,” said Fitria.

This synergy and collaboration was the key to digital transformation that served humanity in a better and more efficient way.

“So together, we can. We can recover together, and then recover stronger,” she said.

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