JAKARTA (TheInsiderStories) - Indonesia government has set up a switching company and launched National Payment Gateway (NPG) after securing principal approval from Bank Indonesia (BI) to facilitate online payments across the country. The new switching company is expected to operate by the end of 2016.
In the first stage, the new company, called PT Link Indonesia, will be owned by state-own telecommunication operator PT Telkom Indonesia Tbk (IDX: TLKM). By the end of 2017, the new financial holding under investment fund PT Danareksa (Persero) will own majority stake in the new company.
According to Minister of State Own Enterprises (SOE) Rini Soemarno, Indonesia needs to set up NPG to control the domestic transaction under local company, to reduce dependence on foreign principal, save foreign exchange reserves and create an efficiency in the national payment.
“This initiative is expected to form a national principal as part of the ecosystem of the NPG in order to remind the efficiency of banking transactions and the sovereignty of the national payment system,” She said at the signing ceremony of principal company forming between Telkom, PT Bank Rakyat Indonesia Tbk (IDX: BBRI), PT Bank Mandiri Tbk (IDX: BMRI), PT Bank Negara Indoensia Tbk (IDX: BBNI) and PT Bank Tabungan Negara Tbk (IDX: BBTN) on Friday.
Currently, the transaction through ATM of HIMBARA reached Rp17 trillion per day. The new business is also estimated to save costs up to Rp6.8 trillion per year.
Chairman of State-own Banks Association (HIMBARA) Asmawi Sjam said NPG will be implemented in three stages. First, Link Indonesia will implement the NPG system on 10,000 automated teller systems (ATM) owned by the four state banks this year and is expected to cover over than 50,000 ATMs by the end of 2017.
In line with the integration system, Telkom and the state banks (HIMBARA) will amend shareholding composition. CEO of Telkom Alex Sinaga said by the end of 2017, the new financial holding company will be under Danareksa, which will hold majority stake in Link Indonesia.
Bank Indonesia Governor Agus Martowardojo added that to support NPG implementation in the country, the central bank will gradually reorganize the institutional role of the first principal so that it could only execute switching functions. Meanwhile, the activity of clearing would be done by services agency, the settlement activity will be conducted by central bank and create standard development management for domestic payments.
“It (switching company) aims to meet the expectations of the community, which will provide cheaper services and could reach all levels of society. On the other hand, NPG will boost its services and bank transactions. If this can be done, the ratio of financial inclusion in Indonesia will increase from only 36 percent at present, whereas our neighboring countries are already in the top 90 percent,” he stated.
Agus urged that after securing principal permit, the SOEs should establish a legal entity of the new switching company, providing system which will be able to connect to each other or inter connections and serve each other with the existing system, committed to comply with international standards and best practice implementation of payment systems such as the use of central bank money in settlement activity and comply with terms and conditions to be determined by the BI to aspects of pricing, capital, ownership and security system.
He said the implementation of national standards technology chip has been implemented since the beginning of 2016. For that, the banks should be preparing the new joint migration card, host and back system and rolled out the infrastructure soon.
The number of debit card transactions in 2015 increased by 153 percent since 2011 from 138 million transactions to 349 million. The transaction is expected to grow by 217 percent in 2020 to 1.1 billion transactions.
While, credit cards transactions increased by 34 percent compared to 2011, from 209 million to 281 million transactions and is estimated to increase to 407 million transactions in 2020, or up 45 percent. (*)