Indonesia: digital “stargazing” until 2021
On the country’s 76th Independence Day, Bank Indonesia announced its collaboration with Bank of Thailand, the central bank of Thailand, on a trial of a cross-border QR payment link (“Cross-border QR payment link“) which is expected to go live in the first quarter of 2022. This is set to become the first of many other collaborations to come with other central banks, in anticipation of when cross-border travel becomes possible again and to adapt to the rapid rise in e-commerce extending beyond national borders.With the launch of the cross-border QR payment link, consumers and merchants in both countries will be able to make and accept instant cross-border QR payments for goods and services The announcement of this initiative coincides with the recent ratification by the Indonesian government of the ASEAN Agreement on Electronic Commerce, which provides a set of policies, principles and rules to govern cross-border electronic commerce in the country. ASEAN. Facilitation and relaxation of cross-border payments is one of the pillars that will support the implementation of the obje Cross-border e-commerce assets included in the ASEAN agreement.
- Bank Indonesia’s 2025 plan
- What’s new in the context of standardization
- Open API payment verification
- Pilot project: Cross-border QR payment link
- Key points to remember
The Bank of Indonesia also recently launched the National Standard for the Open Application Programming Interface (API) in Payments (SNAP), a set of protocols and instructions that facilitate open interconnection between applications in processing payment transactions. Both initiatives reflect Bank Indonesia’s commitments to further accelerate the digitization of the payments system, as outlined in Bank Indonesia’s 2025 Master Plan. With this in mind, the Bank of Indonesia has issued the following:
- Bank of Indonesia Regulation No. 23/11 / PBI / 2021 on the National Standard of Payment System (Standar Nasional Sistem Pembayaran) (“National regulatory standard“)
- Bank of Indonesia Governing Council Regulation No. 23/15 / PADG / 2021 on the Implementation of the National Standard for the Open Application Programming Interface in Payments (Implementasi Standar Nasional Open Application Programming Interface Pembayaran) (“SNAP Regulation“)
Bank of Indonesia’s 2025 plan
As a reminder of our previous customer alert, the publication of the 2025 payment system master plan covers five initiatives:
- Open bank
- Retail payment system
- Market infrastructures
Open banking as a first initiative aims to improve the implementation of open APIs so that it is standardized. Fast forward to 2021, here we are with the launch of the National Standard Regulation and SNAP – a stepping stone to accelerate open banking in payment system services. SNAP should create integration, interconnection and interoperability between API providers to increase the efficiency of the payment system.
What’s new in the context of standardization
Under the National Standards Regulation, the Bank of Indonesia applies a national standard for the implementation of the payment system, which covers governance, risk management, security standards and interoperability in the processing of payments. data or payment transactions. As part of the operationalization of the principles set out in the National Standard Regulation, the Bank of Indonesia has also issued the SNAP Regulation as the implementing regulation, especially for open API in payments.
With the issuance of the SNAP, two documents will be issued:
- Technical and safety standard, data standards and technical specifications SNAP (“SNAP technical standards“): This covers, among others, standards on communication protocols, types of API architectures, data structures and formats, authentication, authorization and encryption methods, governance requirements API access, as well as data structure requests and data structure response.
- SNAP Governance Guidelines (“SNAP Governance Guidelines“): This covers guidelines on consumer protection, data protection, prudential requirements for service providers and service users, and contracts between users and API service providers.
Open API payment verification
Under the SNAP Regulation, an open payment API service provider (“Service provider“) is a Payment Services Operator (PJP) that provides SNAP-based Open API payment services. Meanwhile, a user of the Open Payment API service (“Service user“) is a PJP or other party other than a PJP that uses SNAP-based Open API payment services for the benefit of its consumers or themselves.
The SNAP regulation requires that Open API payment verifications be performed for service providers, service users and developers of Open API payment systems in order to comply with SNAP technical standards. This is done by registering through the SNAP developer site, after which they must undergo a functionality test, including, but not limited to, a security system test.
The SNAP regulation states that SNAP technical standards will be published on the SNAP developers site. On the other hand, the SNAP governance guidelines will be published on the SNAP governance site. However, the first publication of the SNAP Governance Guidelines will be uploaded to the Bank of Indonesia’s website, so be sure to keep an eye out for it.
Pilot project: Cross-border QR payment link
With the launch of the cross-border QR payment link, consumers and merchants in Indonesia and Thailand will be able to make and accept instant cross-border QR payments for goods and services. Indonesian users can use their mobile payment apps to scan Thai QR codes to make payments to merchants in Thailand. Likewise, Thai users can use their mobile payment apps to scan QRIS (the Indonesian standard for quick response codes) to pay Indonesian merchants for goods and services.
The project is a collaboration between the Indonesian Association of Payment Systems (ASPI); the Thai Bankers Association; 13 QRIS providers; Indonesian switching operators Rintis, Artajasa, Jalin and Alto (RAJA); and the Thai payment system operator National ITMX. Transactions will use direct currency quotes provided by Authorized Cross Currency Banks (ACCDs) as part of the Local Currency Settlement (LCS) framework. ACCD banks now include:
- Indonesian banks: PT Bank Central Asia Tbk, PT Bank Negara Indonesia (Persero) Tbk and Bank Rakyat Indonesia (Persero) Tbk
- Thai banks: Bangkok Bank, Bank of Ayudhya and CIMB Thai Bank
Bank Indonesia cooperating with Bank of Thailand aims to ensure a smooth interconnection for merchants, customers and operators for a full business launch in the first quarter of 2022.
Key points to remember
Service providers in the Indonesian payment systems industry should review the SNAP regulation and keep an eye on the developments that will result from the implementation of the regulation, with the aim of ensuring that the implementation of the open API in the payments conforms to the standards set by the Bank of Indonesia and ASPI as a self-regulatory body in the Indonesian payments system space.
As the synergy of innovations in digitization becomes more imperative, the ways to reform the digital landscape for Indonesia become clearer. The national standard and SNAP will reduce sector fragmentation, while the cross-border QR payment link will encourage the acceleration of economic and financial digitization in Indonesia. Amid the uncertainty due to the COVID-19 pandemic, we appreciate the efforts of the Bank of Indonesia to stimulate economic recovery. Slowly but surely, Indonesia is taking a step towards sustainable economic development.
This Client Alert was issued by HHP Law Firm (Hadiputranto, Hadinoto & Partners), a member firm of Baker McKenzie International, a global law firm with member law firms worldwide. In accordance with common terminology used in professional service organizations, a reference to an “partner” means a person who is a partner or the equivalent in such a law firm. Likewise, the reference to an “office” means an office of such a law firm. This may be termed a “lawyer advertisement” requiring notice in some jurisdictions. Past results do not guarantee a similar result. ”