Banknote Recirculation by Cash Handlers

APJATIN - THE INDONESIAN CASH MANAGEMENT ASSOCIATION

International Seminar – Currency Management Systems 26th – 28th September 2017, Yogyakarta

APJATIN – Who We Are

• The only Association of Cash Management Companies in Indonesia

• Established in 2008

• Currently Comprised of 27 Member Companies

• Membership is Voluntary however a number of the Largest Banks will only allow APJATIN Members to bid on Tenders

• Recognised as the Voice of the CM Industry by Banks, Insurance Companies, the National Police Force, Bank Indonesia, The Ministry of Manpower, Retailers and other related Stakeholders

• Initially the creators of a code of practice for the Industry

APJATIN – The Associations Function

• Liaise between members and;• The National Police Force

• The Banks (Our Clients)

• Insurance Companies

• The Manpower Departments/Ministry

• The Central Bank

• Keep members up to date on regulations and possible threats to or opportunities for our business sector

• Encourage members to adhere to our code of conduct

• Assist and Assess new companies that want to enter the Cash Management Business, and grant them membership once they have reached agreed upon standards and fulfilled all legal and licensing obligations

APJATIN – Members Business Functions

Cash In Transit

Cash Processing

ATM Replenishment and FLM

Cash In Safe

Second Level Maintenance

Valuable and Vulnerable Cargo

Foreign Banknote Transportation

Cash Pooling

Requirements to Become a Member of APJATIN

All Company Legal Documents in Order

Site Visit to Check on Progress on Compliance for Minimum Security Standards

Demonstrated Willingness to Follow APJATIN Code of Conduct

Shareholders and Directors checked to be in Good Standing

License from the National Police Force for The Safeguarding and Transportation of Cash and Valuable Goods

RCMC (Rupiah Cash Management Company) License from The Central Bank Consisting of 4 Categories;

1. Cash Distribution

2. Cash Processing

3. Cash in Safe

4. ATM Replenishment & Monitoring (ATM/CDM/CRM)

APJATIN – FY2016 Overall Members Profile

Cash Processing Turnover from Jan-Dec 2016

of Rp 3,583,770,633,392,030 ($269.5 Billion)27 Members

38,710

Employees

2,691 Armed

Police Officers

1,916 CIT

Vehicles

2,407 Static

Security Guards

4,098 Mobile

Security Guards

Aprox. 40,000

ATM, CDM and

CRM Covered

APJATIN – Members Cash Processing Turnover 2014 To 2016

Year Turn Over IDRUSD Equivalent

Turn Over

Increase

YoY

Number of

Cities

Operating

In

Number of

Provinces

Operating

In

2014 2,619,249,040,000,250 $196,936,018,045 - 96 26

2015 3,076,581,457,296,220 $231,321,914,082 17.5% 100 30

2016 3,583,770,633,392,030 $269,456,438,601 16.5% 103 34

Growth from;

• Additional ATM added to Bank

Networks and APJATIN members

servicing them

• Rising number of Indonesians

having bank accounts

• Salary levels growing and with

it additional disposable income

especially amongst low income

group

• 99% of transactions in

Indonesia are still cash based

ATM Growth in Indonesia

0

15.000

30.000

45.000

60.000

75.000

90.000

0

5.000

10.000

15.000

20.000

25.000

30.000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Num

ber

of

ATM

s In

stalled

Top 4 Banks ATM Growth

4 Banks TOTAL BRI BNI Mandiri BCA

• ATMs installed has

averaged 24% YoY

growth since the

Financial Crisis

• BRI Averaged 44%

growth YoY of ATMs

installed since 2008

• Total ATMs installed at

the end of 2016 for

just 4 banks out of

over 120 was 77,408

Figures taken from banks Audited Annual Reports

Worldwide – 2015 SnapshotCountry Population ATMs

Ratio Population

per ATM

ATM per

100,000

Population

Population

Median Age

Population

Density per Km2GDP per Capita

(USD Nominal IMF)

India 1,390,000,000 236,000 5,890 17 27.6 402 1,723

Philipines 104,920,000 19,084 5,498 18 23.4 349 2,924

Vietnam 95,540,000 17,500 5,459 18 30.1 283 2,173

Malaysia 31,630,000 11,626 2,721 37 28.2 97 9,360

Indonesia 263,990,000 103,419 2,553 39 29.9 138 3,604

South Africa 56,770,000 27,500 2,064 48 26.8 43 5,261

China 1,410,000,000 900,000 1,567 64 37.1 144 8,113

Brazil 209,290,000 177,027 1,182 85 31.6 24 8,727

Thailand 69,040,000 63,500 1,087 92 37.2 128 5,899

EU (ex UK) 446,000,000 410,500 1,086 92 42.7 116 32,384

UK 66,180,000 70,513 939 107 40.5 271 40,096

Russia 143,990,000 168,000 857 117 39.3 8 8,929

Australia 24,450,000 31,000 789 127 38.6 3 51,850

USA 324,500,000 425,000 764 131 37.9 33 57,436

Totals from 14 Listed 4,636,300,000 2,660,669 1,743 57 33.7 69 12,168

World 6,700,000,000 3,100,000 2,161 46 30.1 54 15,800

ABOVE WORLD

AVERAGE

BELOW WORLD

AVERAGE

WORLD

AVERAGE

Cash Management CompaniesOpportunities and Challenges

OPPORTUNITIES FOR INDUSTRY IN INDOENSIA

• Incredible Growth of ATM Network

• Bank Indonesia Encourages all Banks to Use 3rd Parties to Manage their ATMs

• Less than 30% of ATMs Being Serviced by Cash Management Companies

• CDM and CDR now being a new area of growth

• ATM network transactions increasing at an even greater rate than number of ATMS

• Banking Penetration still remains low in Indonesia

Cash Management CompaniesOpportunities and Challenges

CHALLENGES FOR INDUSTRY IN INDONESIA

• With rapid expansion of business which all APJATIN members are experiencing, comes the need for additional Capital Investment and Working Capital, especially when;

• Low Margin Service Business

• High Wage Inflation

• Human Resource Development in Indonesia still needs improving

• Maintaining Service Levels and Machine Uptime whilst having to train new staff and add additional branches

• Sometimes Availability of Armed Police if during Holidays or Security Alerts

• Recent Addition of Licensing Requirement from Bank Indonesia

Challenges for Members on Complying with PBI PUJP Licensing

Standardization for PJPUR includes:

1. Building Standards

- Loading Room

- Body Searching Room

- Banknote Processing Room

- Vault Room

- Licensed for Business Use

2. Vehicle Standards

- At least 2 compartments for banknotes

and passenger

- At least 3 passenger capacity

- Size adequate to transport cash

- Body box construction has 2 door layers

for safety

- has fog lamp, toolkit, body box lighting,

and breakdown safety sign

- GPS and mobile communications

- has door lock system

- Metal Guards on windows

- Good air circulation and subject to

Indonesia Roadworthiness Standard

Challenges for Members on Complying with PBI PUJP Licensing

3. Banknote Sorting Machine Standard

- Capable to count, sort and detectthe banknote authenticity

- has 4 processed banknote pocket

- Capable to detect and sortbanknote based on BI fit/unfit anddamage standard

4. Banknote Counting Machine Standard

- Capable to count and detect counterfeit banknote

- At least 3 digits as banknote counting instruction

5. Coin Counting Machine Standard

- Capable to count coin

- Has counted coin pocket

- Capable to distinguish every coin

denomination

6. Packing Standard

- Banknotes Packing

- Coin Packing

7. Reporting to Central Bank

Before BI Regulation After BI Regulation

Code of Practice Created by APJATIN as Minimum to

Operate Cash Management

Business. As through association

and self-regulated only about 20%

of members fully complied

Created after a lot of consultation

with all stakeholders. Now

regulation that all Cash

Management Companies must

adhere to in order to stay in the

Industry

Infrastructure Members given guidelines however

have been tempted to expand

their business without sticking to

standards

All infrastructure now has to be to

BI Regulation Standards, including

Buildings, SOP, Vehicles, Sorting

Machines, Human Resources, Etc

Bank Tender Pricing Unfair as Companies not adhering

to standards had a competitive

advantage as lower COGS

compared to Companies following

Guidelines

In the Future will be fair as all

companies will have to have at

least compliant infrastructure and

the cost base should be similar

Positive Effects of Regulation by Bank Indonesia

Positive Effects of Bank Indonesia Regulating Industry

Before BI Regulation After BI Regulation

Reporting and Potential Fraud Guidelines not Followed

completely so higher chance of

fraud or theft. Reporting not

enforced and voluntary

Now must report to BI standards

Monthly, Periodically and

Incidentally. Possibility of Fraud

Greatly Reduced

Money Sorting and Counting

including Counterfeit

No standards apart from what has

been set as guidelines

Sorting of Money now checked by

BI and strictly controlled with

penalties in place for not finding

counterfeit notes

Penalties No Penalties for Non-Compliance Now Strict Penalties

Conclusion

• Although Challenging for APJATIN Members the New Regulation and Licensing will improve the Industry in the Long Run

• With such tremendous potential growth ahead of the Cash Recirculation Needs in Indonesia, the Industry needed to be more controlled and professional

• The Banks will feel more comfortable to eventually hand over their ATM and Cash Management to Third Parties

• Uptime for ATMs will continue to stay high and therefore consistently provide their much needed function in Indonesian Society

• Availability of ATMs across Indonesia for all its citizens will mean that many of the unbanked can open a bank account and enjoy the advantages of banking