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Lecturer: Jogiyanto HM

Fitri Dwi Astuti 10/314156/PEK/15695 Batch 57 International



Technological development in information and communication brings new impact towards the innovation in electronic payment. In Indonesia, we already know there are several kinds of electronic payment such as phone banking, internet banking, credit cards and debit cards/ATM. Although it used different type of technology, generally electronic payment is always linked directly to the banking customers account. Each instruction, that customers must follow when they used electronic payment, needs authorization process and will be charged directly into customers account. However, any payment made using by e-money does not always require authorization process and not directly associated with customers account at the bank. This is because e-money is a stored value product in which the monetary value has been recorded in monetary value payment instruments being used. According to its simplicity, e-money itself potentially can be used to shift the role of cash for payments in retail transactions. Retail transactions can be done easily and cheaper for both consumers and merchants.

E-Money System

E-money is an electronic payment instruments in which the value of the money is stored in the electronic media. According to Director of Directorate of Accounting and Payment System of Bank Indonesia, Dyah N.K. Makhijani, e-money is one of the alternative forms of payment. The form itself can be in various types. The one which is already known by the society is in chip form which is embedded in a card or sticker.

The implementation of e-money itself usually camouflage into debit card. The basic form of debit card is card and the based it used is through online transaction. Transaction using e-money can be done in offline system and the balance account will be reduced each time the transaction happened. The main difference is that every time a transaction done using debit card, it requires online connection for authorization to the issuer, in this case is bank. Every time transaction is done, bank deposits would be reduced. While using e-money, every time a transaction made, savings in e-money is indeed directly diminished but the data on the issuer may not reduce immediately at that time. The data on issuer will be reduced only when the merchants claims for transactions that have been done. After that, data between issuer and e-money will have the same amount.

Figure 1. Card-based e-money mechanism

Type of e-money

Based on the media used in e-money, there are two types of e-money products: a. Prepaid card Commonly know as electronic purses. The characteristics are:
1. Electronic value is stored in a chip (integrated circuit) embedded in card. 2. Transfer mechanism of funds is done by inserting the card into a

particular device (card reader). b. Prepaid software Commonly know as digital cash. The characteristics are:
1. Electronic value is stored in a hard disk in personal computer (PC). 2. Transfer mechanism of fund is done through a communication network

such as internet at the time the payment happened. Based on the model, there are also two types of e-money products: a. Chip-based model The small size of chip enables it to be stored in the card. Therefore, we can not see any differences with debit card or credit card. If the chip is formed into sticker, it can be attached anywhere such as in mobile phone, watches, wallets, bags, etc. This model can be used in offline system because the nominal itself embedded in the chip.

b. Server based model For this model, some amount of money is managed by the server publishing. This model usually developed by Telco Provider. Telco has a server that can manage e-money account, just like top-up for mobile phone. When Telco developed e-money, it will make a separate account that can be used for payment. Therefore, it could be grown in only one medium. Using this model, we can check our balance either e-money or top-up and we can transfer e-money balance to top-up balance but it cannot be done vice versa. If it is incorporated in mobile phone, the trigger could be via SMS. Customers will get user ID or password. This is usually called as virtual account model.

Another provider which also developed e-money is Telkomsel. According to Mobile Commerce Manager of Telkomsel, Reyhan, since March, Telkomsel had already got permission to implement e-money and it called as Telkomsel Tunai. However, it only limited used by internal employees of Telkomsel as it is still in early stages of development. Telkomsel has cooperated with Fuji Image Plaza as the partner. Another company that also has been given permission by Bank Indonesia to issue e-money prepaid card is BCA with its flazz BCA. Flazz BCA is used by employees of BCA and Bank DKI for payment of TransJakarta and Telkom with i-VAS is still limited for certain online games. So far, there are already 10 e-money issuers in Indonesia including Bank DKI Jakrta (Jak Card), BCA Tbk. (Flazz), Bank Mandiri Tbk. (Indomaret Card, Gaz card and E-Toll Card), Bank Mega Tbk. (Studio Pass Card and Smart Card), BNI Tbk. (JavaJazz Card and Kartuku), BRI Tbk. (Brizzi), PT. Indosat (Dompetku), PT. Skye Sab Indonesia (Skye Card), PT. Telekomunikasi Indonesia (Flexy Cash and i-Vas Card), PT. Telekomunikasi Selular (T-Cash).

Figure 2. E-money cards in Indonesia

Company interested in issuing e-money prepaid card must have certificate from audit system of independent security audit system and must be 2 year experienced in the issuance of single purpose prepaid card.

Advantages and Disadvantages of e-money The implementation of e-money brings advantages and also disadvantages, just like two side of coin, to the society. Several advantages that come with e-money are: 1. More comfortable than bring cash money, especially for small value of transaction. 2. User does not need to bring money for transaction and also does not need to save the change. 3. Error in making change can be minimized.

4. User can reload e-money card from home via phone line. 5. Only need shorter time to complete the transaction compared to credit card or debit card. The use of e-money is not intended to totally replace small money. It is an easier way for transaction. People no longer need to carry coins but only simply touch e-money to the sensor equipment. Despite the advantages, e-money also has several disadvantages: 1. There still no mutual interconnection and interoperability. Therefore, according to Bank Indonesia, standard setting synchronization of e-money must be done immediately so that people do not need to have several e-money for transaction. 2. E-money is still prone to crime. There should be any protection procedure of emoney usage. 3. The usage of e-money without online authorization or PIN enables e-money can be used by anyone. Suppose when someone had lost e-money, the one who found it can freely use the e-money without consciousness of the owner.

Issues in e-money Development

There are also several issues in the development of e-money such as: 1. Monetary policy E-money could increase velocity of money which temporary will reduce the effectivity of monetary aggregate. From demand side, if e-money is used as substitution for bank saving, there will be significant declining in the number of banking saving account that will reduce banking reserve in central bank. From

supply side, if e-money is used as substitution for cash money, the balance of central bank will significantly decline.
2. Seigniorage income

Seigniorage income is related to ability of central bank to issue cash money. If emoney is used to replace cash money, the seigniorage income will significantly decline and it will make banking could not cover its operational cost. 3. Issuer The issue of e-money issuer is related to either the issuer is bank, financial institution or non-financial institution. Since central bank can only control bank, if financial institution and non-financial institution also given permission to issue e-money, it will be difficult for central bank to control the activities. 4. Security The criminality can be done either in merchant level, devices fraud, data fraud or software malfunctions. Several protections can be implemented, such as: a. Tamper-resistant microchip for card-based b. Encryption technology for card-based and software-based c. Limitations of maximum value can be stored 5. Money Laundering Several factors that attract people to do money laundering: a. Whether e-money can be used for direct transaction without requirement to authorize in center database b. Maximum fund stored in e-money c. Easiness to cross border or cross country transaction

6. Legal aspect This aspect is related to e-money development regarding to its rights and obligation from each party such as customer, merchant and issuer. Factors that must be considered are when or at what level of time the payment is claimed as final and who responsible for the credit risk, settlement risk and another risk that night be raised before final settlement. E-money also has to be investigated whether it against monopoly right of central bank as issuer of cash money or not, and whether central bank could issue its own e-money or not. The development of e-money also needs a regulation in clearing and settlement.


E-money is not intended to totally replace small money. However, once people decided to use e-money, they do not need to carry coins anymore but simply just touching e-money to the sensor devices. The using of e-money will accelerate the time for transaction so that the transaction will run efficiently. By using e-money, people do not need to have a bank account to do transaction. By purchasing e-money with some cash, user can spend through debt it in every transaction in a particular merchant. For micro payment, public will get some benefits by using e-money because of its efficiency on time. However, there also some consideration about security and any other aspect that must be emphasized more by the issuer regarding the e-money development.


Astuti, E. Ari. No year. E-money, Inovasi Alat Pembayaran. Downloaded from on Thursday, December 20, 2011 at 15.16.

Bank Indonesia. No year. Paper Kajian Mengenai E-Money.

Hatta, Arief. 2011. E-money : Dilematis Bagi Bank?. Downloaded from on Thursday, December 20, 2011 at 15.16.

Kalsum, Umi and Ahniar, Nur Farida. 2008. Transaksi e-money Baru Capai Rp 9,4 Miliar. Downloaded from on Thursday, December 20, 2011 at 15.16.