TILE, songsion USgal ne? Rabu, Janut 27, 202) [Issue Number 4051 BI Finally Issues Provisions on Indonesia Payment Systems As a follow up to the various initiatives that were originally enacted under the 2025 Indonesian Payment System Blueprint.) Bank Indonesia ("BI") now has issued Regulation No. 22/23/P8/2020 on Payment Systems (‘Regulation 23/2020"), which has been primarily designed in fer to restructure Indonesia's Payment System (Sistern Pembayaran ="SP’) industry while maintaining the development of the SP Industry in line with developments in SP digitalizat ‘As the overall framework for the Indonesian SP industry, Regulation 23/2020 encompasses a wide range of subject maiter, including provisions on access policy, the organization of SP, innovations in SP technology, infrastructure development, exit policy and so forth. However, for reasons of concision, this edition of Indonesian Legal Brief (ILB) will confine its discussion to the following specific matters: LSP components and processing stages, 2. SP organizers, and 3. Licensing and appointment procedures for SP organizers ‘SP_Components and Processing Stages Regulation 28/2020 has now established the main components of Indonesian SP systems, which include: 1) Mechanisms; 2} Infrastructure; 3) Institution: and 4) Sources of funding and access to sources of funding {3] Furthermore, Regulation 23/2020 also sets out the various processing stages which are involved in the completion of Payment transactions and which encompass a series of specific actions. The table below sets out a list of these processing stages along with their elaboration:'4] Action Remarks Pre-transact Initial activities that are undertaken in order to initiate payment transaction processing include the selection of consumers, the printing of cards, personalization of cards, provision of information on sources of funding and provision of infrastructure such as terminals and readers, Initiation This activity involves the initiation of orders or instructions for transfers of funds through tools, media andlor sets of procedures and through the use of certain methods or payment transaction technologies. This is to be followed by forwarding activities that involve payment transaction data and a orizations. Authorization ‘This stage encompasses transaction approval after the forwarding of a payment transaction and is to be conducted through the following steps: 1) Verification or authentication of the identity of the owner of the relevant funds who is conducting the payment transaction; 2) Validation of access to sources of funding and completed payment transactions; and 3) Ensuring of relevant funds, he sufficiencyClearing After a payment transaction has been completed, various activities should be undertaken in order to reconcile, confirm and calculate the rights ar obligations of the relevant parties, and which set out the final position regarding the rights and obligations of said parties prior to the final settlement being conducted, Final settlement A settlement activity that is final and binding will then be completed through the debiting and crediting of the relevant party's account and by observing the financial rights and obligations of each party Involved In the processing of payment transactions based on clearing results. Post-transaction This activity is conducted after printing invo cof data andjor information on paymer by the relevant service users. he final settlement and encompasses the of transactior ‘or completed transactions and the submission ransactions that have been completed SP Organizers Pursuant to Regulation 23/2020, there are, in essence, two types of SP organizers, specificaly:(5) 1 Payment Service Organizers (Penyedio Jasa Pembayaran ~ "PJP", which comprise banks and non-bank agencies that provide services in order to facilitate payment transactions with service users; and 2. Payment System Infrastructure Organizers (Penyedia Infrastruktur Sistem Pembayaran ~ “PIP"), which comprise parties, including BI, that organize facilities infrastructure that is used in order to transfer funds in the interests of their members. In addition to the two types of SP organizers specified above, Regulation 23/2020 also recognizes supporting organizers a8 parties that are permitted to cooperate with PIP and PJP in order to support the implementation of SP.(6] Details of the scope of the various activities which are permitted to be undertaken by each type of SP organizer are elaborated upon in the table below: SP Organizers Permitted Activities PoPt7) Activities that are permitted to be carried out by PJP encompass the following: 1. Provision of information regarding the sources of funds which are utilized in order to meet payment transaction obligations (‘Sources of Funding’), including the provision of information on the initiation of payments based on the approval of 2.Payment initiation and/or acquiring servi transactions; 3. Administration of Sources of Funding, including transactions, andlor 4 Remittance services, including the acceptance and implementation of fund transfer including the forwarding of payment © authorization of payment orders where the relevant Sources of Funding do not derive from any accounts which are administered by remittance service organizers.PIP[a] Activities that are permitted to be carried out by PIP must be strictly conducted in the Interests of their members and encompass the following: 1.Clearing activities, including reconciliation, confirmation and the calculation of financial rights and obligations of PIP members prior to any final settlement: and/or 2.Final settlement, which comprises a final-and-binding settlement through the debiting and crediting of a PIP member's account based on the results of the relevant clearing process, Supporting Supporting organizers are allowed to perform activities that support the activities of PIP or organizers(9) PIP, specifically the provision of technology for the processing of payment transactions and/or other SP implementation supporting activities, However, such activities are restricted as follows: L.Must only involve the provision of supporting services which are technical or problem-solving in nature; 2 Must involve control over payment transactions that are still being processed by PIP or PIP; 3.Supporting organizers are prohibited from accessing and/or administering any Sources of Funding. Finally, itis important to note that Regulation 23/2020 classifies PJP and PIP in terms of the implementation of SP as follows:{10} 1 Systemic Payment System Organizers (Penyelenggora Sistern Pembayoran Sistemik/PSPS}; 2.Critical Payment System Organizers (Penyelenggara Sistem Pembayaran Kritikal/PSPK}; and 5, General Payment System Organizers (Penyelenggara Sistem Pembayaran Umur/PSPU), icensing and Appointment Procedures for SP Organizers In order for PIP and PIP to be able to conduct their activities, as specified above, they are required to secure the appropriate Iicenses from BI {for PIP) or be appointed by Bl {for PIP) 7] The overall procedures for PIP licensing and PIP appointments are set out below: a. PDP Licensing Procedure:{I2) = ==4 Lon It is important to note that said licenses break down into several categories based on the relevant activities which are permitted to be conducted. Details of the permitted activities for each license category are set out in the table below] Provision of information regarding Sources of Funding qv y - Payment initjation andlor acquiring services q q - Administration of Sources of Funding qv : y Remittance Services y : yb. PIP Appointment Procedure: In contrast with the POP licensing procedure, whereby interested parties are required to submit applications, any parties which are looking to become PIP will be directly assessed and appointed by BI based on the following considerations: 1) Impact on the overall stability of the financial system; and/or 2) The public interest [14] Furthermore, in addition to the abovementioned considerations, PIP candidates must meet various appointment requirements which encompass the following aspects) |LInstitutional considerations; 2. Capital and finances, 3. Risk management; and 4,The capabilities of the relevant information system, Regulation 23/2020 comes into force on 1 July 2021. fy 1 See the official Banke Indonesia website: hpshennbige denlungsilamabistempembayararJoluerint202Stelaulasps, as accosted on 15 January 200. (aca, Regulation 252020, (oar 4 Regulation 232020, (6) Ares Regubton 797020 and ts eda. (5148.1 4-5) ands Reguiion 252020, 15) Ae. 52} Regustion 2/2020, (Aes ane, Regulation 20/020, {AN 18 Regation 2/2020, (Ae Regulntion 22020, 10} rs 46-47, Regutsion 252020 Iman 0 and 2, Regultion 23020 (2 For deta of te PIP hensng procedure, se W520, Regulatlon 252020 15 Ar 6 Regulation 20070 1] 28 Regulation 22020. 181824 Regulation 2572020,