Bank Indonesia (“BI”) has issued a long-anticipated regulation on e-money that stipulates a number of requirements and prohibitions that were previously unregulated. The new regulation, BI Regulation No. 20/6/PBI/2018 regarding Electronic Money (“BI Reg 20”), revokes all existing BI e-money regulations.
BI Reg 20 opens with an explicit classification of e-money based on the scope of its use, namely open-loop and the previously unmentioned closed-loop e-money. The difference between the two classifications lies in the party receiving payment: if the party receiving payment – “Goods and/or Services Provider” under BI Reg 20 – is the same party that issued the e-money, then it is closed-loop. If the e-money can be used to make payments to parties other than the issuer of the e-money, it is an open-loop scheme.
E-money providers are required to obtain the appropriate BI license. An exception exists in cases where an e-money issuer provides a closed-loop scheme with a floating fund of less than Rp 1 billion (“Exempted Closed-Loop E-Money”), in which case the issuer is exempted from the BI licensing requirement.
Requirements for E-Money Issuers
BI Reg 20 stipulates several requirements that previously were only hinted at by BI in press releases. These requirements include:
- Capital Requirement: Non-bank institutions acting as e-money issuers must have at least Rp 3 billion of paid-up capital, which must be increased in proportion to the floating fund held by the e-money issuer.
- Foreign Shareholding Limitation: there is a maximum 49% foreign ownership for non-bank institutions acting as e-money issuers. This limitation applies to both direct and indirect ownership based on BI’s considerations, which includes the track record of the non-bank institution, technology used, and the scope of use of the e-money. E-money issuers that have already obtained their license before BI Reg 20 came into force must abide by this limitation if such issuers conduct any change of ownership resulting in a change in the foreign shareholding.
- Resident Directors Requirement: BI Reg 20 requires the majority of the members of the Board of Directors of a non-bank institution providing e-money to be domiciled in Indonesia.
- Limitations to Controlling Shareholders: a party is prohibited from being a controlling shareholder in more than one non-bank institution that have the same payment system service provider license (e.g., two non-bank institutions both of which have obtained an e-money issuer license). A party is also prohibited from being a controlling shareholder in two non-bank institutions that are in two different payment system services group (i.e., customer facing and non-customer facing). This requirement does not apply to state-owned non-bank institutions or for ownership in providers that conduct their activities based on different principles (i.e., conventional business and sharia business).
Additionally, non-bank institution providers are prohibited from taking any corporate action that results in a change in their controlling shareholders within the first five years from the issuance of the e-money license, unless in certain circumstances and with BI approval.
- Regulation on Exempted Closed-Loop E-Money: Exempted Closed-Loop E- Money must also consider the provisions of BI Reg 20, at the very minimum the provisions on risk management and consumer protection.
The regulation came into force on May 4, 2018. Transitional provisions in BI Reg 20 generally require adjustments to be made by e-money license holders and prospective e- money license holders within six months since BI Reg 20 came into force.