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JAKARTA (TheInsiderStories) – Indonesia, home of more than 250 million humans, matures with strong consumer power. Dominated by a millennial generation, Indonesia is now entering the digital era, where transactions and payments are customarily carried out with cards or smartphones – in a protocol known as electronic money (e-money).

In order to provide e-money products and services, a company must be granted a license from Bank Indonesia (BI), as the national payment system authority. The permit is issued by the Policy and Supervision Department of the Payment System of BI.

Based on central bank regulations, providers of e-money required to obtain a license from BI include: Principal, Issuer, Acquirer, Clearing Operator and Final Settlement Operator.

This regulation has jammed certain business payment systems owned by e-commerce companies. On Monday, Oct. 1, 2017, the central bank suspended e-money services from well-known companies such as TokoCash (Tokopedia), ShopeePay (Shopee), Paytren, and BukaDompet (Bukalapak), because these firms had not been listed as a ‘provider of payment services’.

Currently, BI stipulates that only 25 companies are licensed to issue electronic money: 11 are banks, while the rest are non-bank institutions.

According to Pungky Purnomo Wibowo, the Payment System Director of BI, any bank or institution other than a bank that holds more than Rp1 billion in electronic money must have been granted a license from the central bank as an issuer of electronic money.

Tokopedia is one of Indonesia’s most popular shopping destinations, with millions of merchants buying and selling through the app. Regarding the license approval process, CEO of Tokopedia William Tanuwijaya declared that the company always complies with applicable rules and regulations.

“We decided to expand our TokoCash service by applying for an electronic money license from Bank Indonesia; as part of the ongoing licensing process, we have decided to temporarily suspend our Top Up TokoCash feature,” Tanuwijaya said in a press statement recently.

Meanwhile, central bank Deputy Governor Mirza Adityaswara has admitted their policy to suspend e-commerce payment services is because the rapid evolution of the e-commerce business and innovation has grown faster than regulations.

“E-commerce is a new thing for Indonesia. And the thing is that the development of e-commerce business has been changing faster than regulations can keep up with it. Now we’re trying to manage the licensing process to protect the public,” Adityaswara reasoned.

The private sector is increasingly aware of the government’s National Non-Cash Movement (GNNT) initiative, which is in line with consumers’ trend to use online services for purchases. According to Pricewaterhouse Cooper research, 31 percent of transactions in Indonesia are currently conducted using non-cash methods, with the number of cashless transactions growing at an annual rate of 23 percent.

Several financial technology, ride-hailing and logistic services providers like Grab and Go-Jek started up their daily services on a non-cash basis, after building their own payment platforms.

The management of Grab has stated that cashless transactions (using smartphones tied to mobile payment systems) are now contributing more than half of the total value of the firm’s transactions. Since the introduction of GrabPay, the value of cashless transactions has recorded double-digit growth every month.

In November 2016, Grab also launched GrabPay Credits, a tool that offers a new cashless stored-value option allowing top-ups via a variety of widely available local funding sources to its GrabPay in-app mobile payment solution. The new tool has grown by a whopping average of 90 percent per month since its launch.

Meanwhile, a similar story applies to Go-Jek. Go-Pay (its cashless transaction system) is growing sharply, and now also accounts for more than half of the total transactions value of the hyper-local transport, logistics and payments startup; their app has been downloaded more than 40 million times by the Indonesian public.

Go-Jek CEO Nadiem Makarim said that in the future the company will expedite Go-pay service, expanding it beyond Go-Jek payment transactions. Go-Pay is projected to be a platform for payment of various e-commerce shopping transactions.

“In the next three to six months, Go-Pay will be a payment not only for transactions in the Go-Jek app,” Nadiem claimed, at the 2017 Global Mobile Internet Conference (GMIC) held in Indonesia last week.

Writing by Elisa Valenta, Email: