Bank Indonesia (“BI”) has issued a circular letter on licensing procedures and requirements related to payment system transactions in Indonesia. BI Circular Letter No. 18/41/DKSP regarding the Implementation of Payment Transaction Processing, dated December 30, 2016 (the “Circular Letter”), is an implementing regulation for BI Regulation No. 18/40/PBI/2016 on the Implementation of Payment Transaction Processing (“BI Regulation No. 18/40/PBI/2016”), which was issued on November 9, 2016. The Circular Letter is accompanied by an Attachment and an FAQ document.

The Circular Letter mainly concerns licensing procedures and requirements set by BI for various Payment System Service Providers, such as (i) Principals, (ii) Switching Providers, (iii) Issuers, (iv) Acquirers, (v) Payment Gateway Providers, (vi) Clearing Providers, (vii) Final Settlement Providers, (viii) Fund Transfer Providers and (ix) Electronic Wallet (E-Wallet) Providers. It also refers to Supporting Providers, as defined in BI Regulation No. 18/40/PBI/2016, which support Payment System Service Providers in processing payment transactions.

Foreign Ownership Limitation

Principals, Switching Providers, Clearing Providers and Final Settlement Providers must be in the form of a limited liability company (Perseroan Terbatas or “PT”) with at least 80% of shares owned by Indonesian citizens and/or Indonesian legal entities. If an Indonesian legal entity owning the shares has foreign ownership, the foreign ownership percentage in the Principal, Switching Provider, Clearing Provider and Final Settlement Provider will be calculated based on (i) direct and (ii) indirect foreign ownership.

Direct ownership is calculated based on one level of ownership above the Principal, Switching Provider, Clearing Provider and Final Settlement Provider, while indirect ownership is calculated based on two levels above. The following are illustrations of direct and indirect ownership.

Illustration 1

The shareholders of Principal 1 consist of:

IndoCo A (Indonesian legal entity)     40%

IndoCit X (Indonesian citizen)             50%

ForeignCo B (foreign legal entity)      10%


The shareholders of IndoCo A consist of:

IndoCit Y (Indonesian citizen)            80%

ForeignCo C (foreign legal entity)      20%


The shareholders of ForeignCo B consist of:

ForeignCo D (foreign legal entity)      80%

ForeignCit Z (foreign citizen)              20%


The foreign ownership of Principal 1 is calculated as:

(20/100 ForeignCo C x 40% IndoCo A) + 10% ForeignCo B= 8% + 10%  = 18%.


So, the foreign ownership of Principal 1 is 18%, which is in line with the maximum 20% foreign ownership allowed under the Circular Letter.

Illustration 2

The shareholders of Clearing Provider 2 consist of:

IndoCo A (Indonesian legal entity)     40%

IndoCit X (Indonesian citizen) 30%

IndoCo B (Indonesian legal entity)     30%


The shareholders of IndoCo A consist of:

IndoCo C (Indonesian legal entity)     60%

ForeignCo D (foreign entity)               40%


The shareholders of IndoCo B consist of:

IndoCo E (Indonesian legal entity)      70%

ForeignCit Z (foreign citizen)              30%


The foreign ownership of Clearing Provider 2 is calculated as:

(40/100 ForeignCo D x 40% IndoCo A) + (30/100 ForeignCit Z x 30% IndoCo B) = 16% + 9% = 25%.


So, the foreign ownership of Clearing Provider 2 is 25%, which is not allowed under the 20% foreign ownership limit.

For a publicly listed company that hopes to become a Principal, Switching Provider, Clearing Provider or Final Settlement Provider, the direct and indirect calculations of foreign ownership as explained above only apply toward an ownership of more than 5% of shares in the company.

We note that the Circular Letter only recognizes ownership by way of shareholding and does not stipulate any other form of ownership. It only contains provisions related to two levels of ownership, as discussed above, while ownership beyond two levels is not discussed. Further, the Circular Letter does not stipulate provisions regarding ultimate beneficial ownership.

Domestic Processing of Payment Transactions

Payment transactions that (i) use a payment instrument issued by an issuer of payment instruments in Indonesia or (ii) payment services provided by a Payment System Service Provider and which are carried out within the territory of Indonesia must be processed domestically. However, this requirement only applies to activities in the authorization, clearing and final settlement stages.


An E-Wallet provider is required to have issued and paid-up capital of at least three billion Indonesian Rupiah. An E-Wallet license from BI is only required for an entity that has reached or plans to reach at least 300,000 users.

In addition to holding payment instrument data, an E-Wallet may hold funds. For an E-Wallet that also holds funds, the funds being held can only be used for (i) payment of purchase transactions and (ii) bill payment. An E-Wallet account may hold a maximum of ten million Indonesian Rupiah, all funds must be in Indonesian Rupiah, and funds held in one E-Wallet account may not be transferred to another E-Wallet account. E-Wallet funds can by topped up by means of cash deposit, transfer or auto debit from savings account, or electronic money. Notwithstanding the ten million Rupiah maximum, there is no limit on transaction values in an E-Wallet account within a specific period of time.

Reporting Requirements

All implementations of the licenses covered under this Circular Letter will need to be reported to BI in the form of periodical and incidental reports. The development of products and activities to implement payment transactions must be pre-approved by BI, as does any cooperation among Payment System Service Providers and between Payment System Service Providers and Supporting Providers.

This Circular Letter took effect on December 30, 2016. It stipulates that parties already carrying out switching, payment gateway and/or E-Wallet activities must conform their activities with this Circular Letter and to apply for the appropriate licenses within six months from November 9, 2016.