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Payment Systems Emerge as Rising Stars in the Investment Sector

Payment Systems Emerge as Rising Stars in the Investment Sector

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In 2017, Indonesia was listed as the country having the highest number of e-commerce growth throughout the world. This claim was substantiated by census data from the Central Bureau of Statistics or Badan Pusat Statistik (BPS), which showed that the e-commerce industry in Indonesia increased 17% within the last 10 years bringing the total number of e-commerce to 26.2 million units. There’s little argument that this industry is predicted to continue growing in Indonesia in the following years. Moreover, with the appointment of Jack Ma, founder of Alibaba Group and the second richest man in China, as the advisor of e-commerce in Indonesia shows that Indonesia is preparing itself for more growth and development in e-commerce than ever before.

So, what is this e-commerce really? E-commerce itself encompasses business activities which utilize technology as its basis. More precisely, e-commerce is defined as trading goods or services through electronic networks, most generally through the Internet. But where do payment systems come in?

Given the prolific growth of online activity in Indonesia, it’s no surprise that Indonesians have altered some of their spending habits, especially their online purchasing. As privacy and security continue to be ‘hot topics’ as they relate to online shopping, the general Indonesian public has become more aware of the need to protect themselves from identity theft and fraud. Thus in line with the growth of e-commerce in Indonesia, there’s a proportional demand for secure payment systems, which obviously highlights this industry within the investment sector, making it a ‘Rising Star’ of sorts. There’s actually significant competition amongst Indonesian e-commerce providers to devise the most secure and user-friendly payment systems for the community. One obvious frontrunner is Tokopedia, who dominated the e-commerce sector in Indonesia throughout 2017, by inventing TokoCash as one of their payment systems which can also be used as e-wallet. Yet Tokopedia is not alone in creating a direct means to buy, take Go-Pay or GrabPay as other examples of new payment systems in Indonesia.

With new methods of payment popping up daily, many companies are competing to invest in the safest payment system. In Indonesia, the payment system business is regulated and monitored by the Bank of Indonesia. Bank of Indonesia has issued Bank of Indonesia Regulation Number 18 Year 2016 concerning the Processing of Payment Transactions. Every payment system provider shall register itself to Bank of Indonesia to acquire its license as a payment system provider. Based on the regulation itself, a payment system provider can be categorized as follows:

    1. Principal;
    2. Switching Provider;
    3. Publisher;
    4. Acquirer;
    5. Payment Gateway Provider;
    6. Clearing Provider;
    7. Final Settlement Provider;
    8. Fund Transfer Provider;
    9. E-wallet Provider; and
    10. Other payment system provider stipulated by Bank of Indonesia.

Each kind of payment system provider has different requirements to be able to obtain the payment system provider license.

Aside from the above mentioned Bank of Indonesia Regulation Number 18 Year 2016, then Bank of Indonesia also issued other new regulation namely Bank of Indonesia Regulation Number 19 Year 2017 concerning the Financial Technology Implementation. In this new regulation, Financial Technology is divided into several types, which are:

    1. Payment system;
    2. Market supporting;
    3. Investation management and risk management;
    4. Loan, funding, and capital provision; and
    5. Other financial services.

In fact, this regulation also becomes a means of guidance in rules for payment systems in the e-commerce sector in Indonesia. In this regulation namely Bank of Indonesia Regulation Number 19 Year 2017, it is emphasized that every payment system provider shall be registered in the Bank of Indonesia. Pursuant to the provision of this new regulation then, Bank of Indonesia also needs to conduct feasibility testing against the payment systems through the regulatory sandbox. The purpose of this feasibility testing is to detect whether the payment system is truly safe either for consumers’ sakes or for the country’s sake in terms of monetary stability.

At the end of the day, few regulations exist for the Indonesian payment system industry due to the fact that e-commerce transactions are still fairly new comparatively in Indonesia. Hence, there is significant opportunity and many worthy elements to consider when evaluating payment systems as a business investment. Clearly, the trend of buying online isn’t going anywhere, opening up vast possibilities for future development on a ground floor level. The savvy investor will turn a ‘Click’ into long-term profit.


Jakarta, 02 March 2018

by : Juliani Hanly, SH




Payment Systems Emerge as Rising Stars in the Investment Sector