ROLLING OUT DIGITAL PAYMENT PLATFORMS -An Indonesian Perspective

17th Annual Cards & Payments Asia25 – 27th April 2012

Singapore

Heru Sutadi

ICT STATISTICS

Until the end 2011, the status of ICT infrastructure and services are as follows:

Fixed line subscribers (PSTN): 8.328.180 subs(3.49 %)

Fixed Wireless Access: 32.819.564 subs(13.81 %)

Mobile: 213.256.931 subs

(89.79 %)

Internet users: 72 Millions(30,31 %)

2

Digital Money Mobile financial services was first

implemented in 2001 by Mobipay in Spain, while mobile banking service has been given for years in some countries

Mobile money becomes the focus of attention because of this phenomenon a success in several developing countries

Predicted until the end of 2013 more than 424 million mobile phone users will send money to other mobile phone users in the same country and 73 million will be sending money to another country

There are three main types of financial services: mobile money transfer, mobile banking and mobile payment

CURRENT MARKET CHALLENGES

Although the market is well established, there are a number of barriers currently restricting it from reaching its full potential and fulfilling the basic consumer needs: Access Security Cost Regulation.

BUSINESS MODELS

IMPLEMENTATION

Compared to the bearer business model, mobile operators who want to cooperate with financial institutions whilst being present at the customer interface (cash in/out) are more dependent on the regulatory environment of their respective country.

If the agency rules prevent them to handle cash and undertake the customer due diligence procedures for AML/CFT prevention, then they may not be able to choose the business models.

FINANCIAL REGULATION

The first level of financial regulation is AML/CFT compliance, which generally becomes applicable when the mobile operator becomes involved in cash handling at the consumer interface.

The next level of regulation applying to mobile operators is prudential regulation. Prudential regulation becomes applicable when risks increase for the involvement of the mobile operator in the financial transaction, for consumers and for the wider financial system.

PRUDENTIAL REGULATION

Prudential regulation ensures that regulated entities are financially sound and promotes their prudent behavior.

The key aim of prudential regulation is protecting the interests of consumers and the quality of an institution’s systems for identifying, measuring and managing the various risks in its business.

Prudential regulation can apply in various measures depending on the risks.

MOBILE OPERATOR PERSPECTIVEFrom a mobile operator perspective following

thresholds of prudential rules depending on the risks involved seem useful: Payment regulation (low risk – light prudential rules)

E-money (medium risk – medium heavy prudential rules)

Deposit taking, i.e. banking (high risk – heavy prudential rules)

However much such a risk-based approach would be desired, it is not the rule, and in many countries banking regulation applies to the majority of financial services offered independently of the risks involved.

BENEFIT TO MOBILE OPERATORNew customer acquisition (individual, corporate)

Non-traditional Telco revenues Transaction fees Share of Forex spread Finders/consumer sign-up fees Future m-banking revenue (e.g. utility bill payments)

Increase in ARPU

Reduced churn (e.g. one operator reduced churn from 3% to 0.5% per month)

Meets government service obligations and CSR Agendas

Opportunity to up-sell (e.g. mobile content, prepaid to post paid)

MOBILE OPERATOR SITUATIONS

From a mobile operator perspective agency rules become relevant with regard to two situations:

1. Can the mobile operator become an agent? • Becoming an agent allows the mobile operator to

use its own distribution chain to accept/disburse cash at both ends of the MMT service.

2. Can a mobile operator operating a payment service or e-money use other retailers as agents for MMT services?

Telekomunikasi

Internet / Multimedia

Penyiaran

ANALOG

UU 36/199Telekomunik

asi

UU 32/2002Penyiaran

UU 11/2008ITE

Old Law & Regulatory

DIGITAL

DIGITALWAVES

RUUKonvergensi Telematika

RUU perubahanPenyiaran

RUU perubahan

ITE

RUU TIPITI

New Law & Regulatory

Regulatory old model

Regulatory new model

TVVoice

InternetSatellite TV

VOD

Telecommunication Broadcasting

Cable TV

IP-TV

Mobile services

Interactive TV

Financial ServicesEntertainment

Game

Music

ICT Act & Reg

Toward a Less cash society Grand design

E money – prepaid card as stated at the PBI no 7/52/PBI/2005 concerning the Card Payment Instrument Operational Activity

Definition: Prepaid product /e-money : stored-value or prepaid

products in which a record of the funds or value available to a consumer is stored on an electronic device in the consumer’s possesion

Access Product (debet card and credit card)

PBI : Peraturan Bank Indonesia / Indonesia Central Bank Rule

DIGITAL MONEY IN INDONESIA

Some operators provide M-Money services:

International remittances which are targeted by Indonesian workers who were working in foreign countries who wish to transfer money to families in Indonesia

Mobile banking services. Some banks have been working with telco operators to include this services as basic services commensurate with the services ringtones, wallpapers or service information and content

Payments also begin to move since taking over two years ago, with the term e-wallet.

Telco Co

103,709 104,935

108,898 112,076

348,587

482,236 503,267

513,511

531,557

604,754

630,287 728,171

-

200,000

400,000

600,000

800,000

Telkomsel Cash User (t-cash)

CASE STUDY (1)

Merchant Category %Retail 94.0%Fashion/ Life style 1.2%Bill Payment 0.1%Education & University 0.4%Food and beverage 0.8%Insurance 0.0%Portal 0.1%Cellular Shop 0.5%Telkomsel Channel 1.1%Others 1.6%

Features :

1.Cash in

2.Purchase

3.Online Purchase

4.Bill Payment

5.P2P Transfer

6.Cash Out

Number of partners : over 150 companies

CASE STUDY (2)

E-CHANNEL GROWTH

TECHNOLOGY TRENDTECHNOLOGY TREND

INTERNET BANKING TRX VOLUME - 1

TransferBNI Credit Card

PaymentNon BNI Credit Card Payment

2009 7.471.188.170,0 126.366.829,8 95.067.169,9 2008 4.129.695.799,0 76.388.869,6 59.453.536,3 2007 990.027.501,4 18.488.879,3 9.690.978,3

INTERNET BANKING TRX VOLUME

INTERNET BANKING TRX

TransferBNI Credit Card

PaymentNon BNI Credit Card Payment

2009 1.612.093,0 68.617,0 44.574,0 2008 978.219,0 43.981,0 31.224,0 2007 276.995,0 14.835,0 6.644,0

Source : BNI 46

Bank /E-

channel

ATM Internet Banking

SMS Banking

Mobile Banking

Phone Banking

BNI BNI ATM BNI Internet Banking

BNI SMS Banking

In construction

BNI Phone Plus

BCA ATM BCA KLIK BCA SMS BCA M BCA BCA By Phone

MANDIRI MANDIRI ATM MANDIRI Internet Banking

MANDIRI SMS Banking

- MANDIRI Call

BRI BRI ATM BRI Internet Banking

BRI SMS Banking

BRI Mobile Banking

BRI Call

DANAMON

ATM DANAMON DANAMON On Line Banking

- DANAMON Mobile Banking

DANAMON Acces Center

CIMB-NIAGA

ATM NIAGA Internet Banking NIAGA

- - NIAGA Call Center

BII ATM BII Internet Banking BII

- - NIAGA Call Center

PERMATA PERMATA ATMPERMATA Mini ATM

PERMATANET PERMATA Mobile

PERMATA Mobile

PERMATATEL

2010 INTER BANK e – banking Map in Indonesia

e-Channel Transaction

MANDIRI BCA BNI

2009 2010 2009 2010 2009 2010INTERNET BANKING > VOL TRX ( Million) 6.1 26.6 97.5 177.7 0.84 1.2 > VALUE TRX ( IDR Trillion) 3.8 8.7 591.0 873.0 3.5 5.1 ATM > VOL TRX ( Million) 122.9 141.9 412.8 436.2 - 166.2 > VALUE TRX ( IDR Trillion) 77.1 97.1 412.0 447.7 - 85.4 SMS/MOBILE BANKING > VOL TRX ( Million) 33.5 41.7 54 77.6 10.5 18.3> VALUE TRX ( IDR Trillion) 1.3 2.6 59.2 90.6 0.787 1.5

E – banking transaction Juny 2009 – 2010 in Indonesia

Source : Infobank Sep 2010

Nominal “Payment “ of the Internet Banking 2007 - 2009 - BNI

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Telkom Telkomsel (Halo)

Indosat Exelcomindo

PLN Tiket Penerba

ngan

Biaya Pendidik

an

Personal Loan

ZIS dan Qurban

2009 20.589 24.848 3.664 2.209 3.445 21.840 40 4.389 4.021

2008 14.101 13.535 2.399 2.299 4.880 12.818 3.365 2.369 46.729

2007 4.290 4.036 750 393 1.777 915 - 376 216

2007 2008 2009

TelkomTelkomsel (Post Paid) Indosat Excelkomindo

PLN (Electricity) Airline Ticket

Education Cost Personal Loan Zakat

2009

3.489.261,55

4.544.277,77

729.644.936,0

0

421.524.575,0

0

796.962.399,0

0

61.137.694,40

7.590.733,00

5.177.783,10

1.240.800,56

2008

2.465.020,92

2.548.235,43

441.173.157,0

0

374.963.564,0

0

955.911.667,0

0

53.025.113,30

3.061.011,36

690.807,14

2.645.025,00

2007

764.322,37

852.943,58

186.424.495,0

0

66.016.179,00

351.179.601,0

0

4.406.045,00

309.005,24

36.863,72

Telkomsel - AS Indosat - IM3 Excelkomindo Mobile 8 -Fren 3 Three Flexi / Esia

2009 1.907.702.858 673.950.000 794.800.000 110.050.000 31.270.000 501.100.000

2008 1.190.650.000 422.950.000 523.165.000 77.000.000 18.110.000 413.150.000

2007 776.121.102 - - - - -

Telkomsel - AS Indosat - IM3 Excelkomindo Mobile 8 -Fren 3 Three Flexi / Esia

2009

27.962

8.388 15.287 2.128

741 12.834

2008

17.811

6.664

9.821 1.304

463 10.676

2007

12.440

-

- -

- -

Nominal “Purchasing Voucher”

“Purchasing Voucher” Transaction

Source : BNI

LAW AND REGULATION

There are several law and regulation that must be consider to provide M-Money services:

Law No. 11/2008 about Information and Electronic Transaction

Law No. 10/1998 about Banking

Law No. 25/2003 about Anti Money Laundering (including Combating Financing of Terrorism)

Indonesian Central Bank Decree No. 11/2009 about E-Money.

Bank Indonesia Regulation no 11/12/PBI/2009 concerning Electronic Money Bank or Non Bank Institution has to obtain the license from Bank

Indonesia as Principal, Issuer, Acquiere, Clearing Procsessor and /or End Settlement Processor

Entity Legal Form :Non Bank institution shall be incorporated as Limited Company that abides to the Laws of Indonesia.

Currency Usage must be Indonesian Rupiah

Enhancement of security Technology : Utilizes a reliable and secure system, Maintain and enhances Electronic Money security Technology, Possesses written standard operating procedures pertaining e-money activity, Maintain the security and confidentiality of the data.

The Limit of e-money : Rp 1,000,000.- for unregistred type of customers Rp 5,000,000.- for registered type of customers

The value of the e-money must equal with the deposit value.

Conclusion

The trend of digital money in Indonesia is increasing significantly recently. It means that this kind of business is very attractive in the very near future

The Licence is granted by Bank Indonesia to Bank and Non Bank institution to be a Principal, an Issuer, an Acquiere, a Clearing Processor and /or an End Settlement Processor

The ICT infrastructure as well as the Broadband Backbone and Broadband Access is seriosly planned by the Indonesia Government to facilitate in implementing the digital money especially m-money.

Thank you for your attention…

Heru SutadiEmail: heru@brti.or.id