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In brief

Happy New Year 2021! We hope that this year things will get better.

Bank Indonesia has issued Regulation No.22/23/PBI/2020 on Payment Systems (“Payment System Regulation“), which is an “umbrella” regulation for the payment system industry. The issuance of this regulation is an implementation of the 2025 Indonesia Payment System Blueprint, which we outlined in our previous client alert. This “umbrella” regulation restructures the regulatory framework of payment systems, including the reclassification of activities of payment system operators. Bank Indonesia’s approach in outlining the rules introduced in this regulation appears to be principle-based and strategic. The technical and operational details of how the rules are supposed to be observed will be outlined in future Bank Indonesia implementing regulations. We anticipate that those will be issued in the coming months, so keep an eye on this space.

The Payment System Regulation revamps the payment system industry to support the digitalization of financial services to keep up with the fast-paced developments in the Indonesian payments space, while ensuring that the security and reliability of payment transactions remain the priorities. This regulation shifts the approach to setting the regulatory framework from an entity-based approach to an activities and risk-based approach. In this vein, Bank Indonesia would be able to be more nimble in responding to developments in digital financial services while upholding consumer protection.

Given the extensive coverage of topics that are captured in the regulation, this initial Client Alert only focuses on licensing and ownership topics.

Bank Indonesia classifies payment system operators into the following:

  1. Payment Services Operators (Penyedia Jasa Pembayaran, a PJP), i.e., banks or non-bank entities that provide services to facilitate payment transactions to users
  2. Payment System Infrastructure Operators (Penyelenggara Infrastruktur Sistem Pembayaran, a PIP), i.e., parties that operate infrastructure as facilities that can be used to move funds for the interests of their members

This regulation will only be applicable from 1 July 2021. However, given that the regulation overhauls the payment system industry and contains a grace period to comply with the rules therein, the payment system industry needs to start planning to align with the new framework in this regulation. We expect that licensing applications that are still in the pipeline with Bank Indonesia and new applications will be evaluated based on the framework under this regulation. Like in any situation where there is an overhaul of a regulatory framework, there are things that need to be clarified with Bank Indonesia.

Categories of payment system operators

A PJP may conduct any of the following four activities (“PJP Activities“):

  1. account information services (penyediaan informasi sumber dana), which include the provision of information on the source of funds as consented to by the user for payment initiation purposes
  2. payment initiation and/or acquiring services, which include routing of payment transactions
  3. account issuance services (penatausahaan sumber dana), which include authorization of payment transactions
  4. remittance services, which include the acceptance and execution of fund transfer instructions in respect of a source of funds that does not originate from an account administered by the remittance operator

A PIP may have two activities:

  1. clearing services, which include reconciliation, confirmation and calculation of financial rights and obligations of members of the PIP before the execution of the settlement
  2. settlement services, which include final and binding settlement by way of account debiting and crediting based on the outcome of the clearing process

In operating the payment system, PJPs and PIPs are further classified into three risk-based categories, depending on the impact that any disturbances or failures in their operations would have on the Indonesian payment and/or financial system:

  1. Systemic Payment System Operators (Penyelenggara Sistem Pembayaran Sistem)
  2. Critical Payment System Operators (Penyelenggara Sistem Pembayaran Kritikal)
  3. General Payment System Operators (Penyelenggara Sistem Pembayaran Umum), i.e., payment system operators that do not pose any significant impact

The above categories are determined based on the size, interconnectedness, complexity and/or substitutability of the payment system operators. Bank Indonesia will periodically evaluate the classification of PJPs and PIPs, based on which Bank Indonesia may set certain requirements in relation to the operators’ capitalization, risk and information system management as well as other aspects.

Licenses and approvals for PJPs and PIPs

Bank Indonesia adopts a licensing system based on activities bundling:

  • A category 1 license allows all four PJP Activities.
  • A category 2 license allows for the first and second PJP Activities.
  • A category 3 license only allows for the fourth PJP Activity and/or any other activity that may be determined by Bank Indonesia.

Bank Indonesia will evaluate applications for licenses based on (i) entity aspects, (ii) capital structure and financial aspects, (iii) risk management capabilities, and (iv) information system capabilities.

For existing licensed payment service providers, Bank Indonesia will conduct assessments to reclassify their existing activities into the activities listed in this regulation. The existing licensed operators will have a grace period of two years to comply with the requirements under this regulation.

Any entity that wishes to undertake a PIP activity would require a prior appointment/designation by Bank Indonesia.

The Payment System Regulation has also updated the regulatory approval mechanism for new products/services and cooperation arrangements between payment service providers. Bank Indonesia has introduced a self-assessment system by which payment service providers ought to, as a first tier, assign risk rating to the proposed product/service or cooperation arrangement. Product approval applications that are deemed to be of low risk only need to be reported to Bank Indonesia, while those that are determined to be of medium or high risk must be approved by Bank Indonesia prior to launching. The same principle goes for cooperation arrangements with other payment service providers. Bank Indonesia reserves the right to re-examine the risk rating assigned by the payment service provider and can require a prior approval to be sought in the event of a difference. This new system should substantially reduce the administrative burden (on Bank Indonesia) that the previous regime entailed, which virtually required any kinds of product and cooperation arrangements to be blessed by Bank Indonesia.

Ownership and control of a non-bank PJP

This regulation differentiates between ownership and control for a non-bank PJP. Ownership and control for a bank PJP continues to be governed under the banking regulations.

Under the Payment System Regulation, a minimum of 15% of the shares in a non-bank PJP must be owned by Indonesian individuals and/or legal entities. In addition to this ownership requirement, at least 51% of shares with voting rights must be owned by Indonesian individuals and/or legal entities.

If there are special rights to nominate a majority of the directors and/or commissioners and veto rights in shareholders’ meetings that may significantly impact the company, the rights must be held by Indonesian individuals and/or legal entities.

Ownership and control of A PIP

A minimum of 80% of the total shares and a minimum of 80% of shares with voting rights in a PIP must be owned by Indonesian individuals and/or legal entities.

If there are special rights to nominate a majority of the directors and/or commissioners and veto rights in shareholders’ meetings that may significantly impact the company, the rights must be held by Indonesian individuals and/or legal entities.


Erwandi Hendarta is a senior partner and the Head of Finance & Projects Practice Group in Hadiputranto, Hadinoto & Partners. Erwandi has extensive experience working in the business and financial sectors. Erwandi has had multiple careers, having worked as a central banker at Bank Indonesia (the Central Bank of Indonesia) handling Government’s projects with multilateral agencies (IBRD/the World Bank, OECF, ADB) and as an investment banker doing corporate finance with Schroders Indonesia (an investment banking arm of Schroders Plc., London) before becoming a lawyer with HHP. In addition to his Indonesian legal degree, Erwandi has an LL.M. from Cornell University, USA, and an MBA from Boston University, USA. He was a recipient of prestigious graduate scholarships from the Fulbright, USA and the World Bank. Erwandi has been a regular contributor to Doing Business publications by the World Bank and the IFC.


Mahardikha K. Sardjana is a partner in the Finance & Projects Practice Group of Hadiputranto, Hadinoto & Partners. He has been specializing in banking and finance matters for more than nine years. Mr. Sardjana has been leading the group's M&A projects on financial institutions for the past eight years. He has been involved in several projects relating to derivatives, commission sharing, securitization, loan syndications, mergers and acquisitions of banks and general banking and finance transactions. Mr. Sardjana has also assisted due diligence projects for acquisitions, mergers, rights issues, companies going private, bond transactions, and in the drafting of the legal due diligence reports for the transactions.


Eddie Dewanda is an Associate Partner in Baker McKenzie Jakarta office.


Johan Kurnia is an Associate in Baker McKenzie Jakarta office.