Bank Indonesia has launched the national payment gateway (NPG) as part of the e-commerce roadmap series. NPG is a system built by the central bank to actualise interconnectedness between switchings, as well as inter-operability of the national payment system. The general public will be able to conduct cashless transaction easily at a more affordable cost.

The other goal of the implementation of NPG is to increase consumer protection by securing data from each transaction. NPG was also developed to ensure supply and integrity of transaction data on national payment system, in order to support the efficacy of monetary policy transmission, the efficacy of intermediation, and the resilience of the financial system.

The presence of NPG was made as a backbone for cashless social aid, electrification of the highway roads and public transportation system, financial inclusion, and the development of electronically-based national trade system as has been mandated through the Presidential Instruction No.74 Year 2017 on E-commerce Roadmap.

“Being proposed more than 20 years ago on the Blue Print of National Payment System in the Year 1995/1996, today marks an important moment in history with the launch and implementation of NPG,” Bank Indonesia Governor Agus Martowardjojo said on Monday, December 4.

For the industry, NPG is expected to encourage infrastructure sharing to increase the use of ATM/EDC terminals, that can be relocated to areas where it was most needed. Investment costs infrastructure can be allocated for other funding activities. It will provide ease for the industry due to the complexity of the connection, from bilateral (between different parties) to NPG-centralised.

“Industry players will be well-maintained; they can continue on enjoying profits under the normal rate.”

As for the customers, they will be able to transact from any bank, payment instrument, and channel. They are also being encouraged to not have too many cards for transactions.

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Merchant discount rate (MDR) is also expected to decrease from the earlier number of two to three per cent to a flat rate of one per cent for off-us transactions (transaction on ATMs or EDC using cards from different banking institutions). However, Martowardjojo noted, customers need to use debit cards with international logo had they want do transactions abroad.

At the early stage of NPG’s implementation, customers will be introduced to debit cards with national logo that can be used for domestic transactions and are acceptable in all merchants’ payments terminal. Slowly but sure, these cards with new logo will be introduced in early 2018.

The NPG system mechanism


Bank Indonesia Governor Agus Martowardjojo with the NPG logo on his background. The logo will be included in newly issues debit cards

Under the NPG system, the central bank builds a system consisting of three operators: the standard, switching, and services institutions. The standard institution is tasked to set up and manage national payments technology standard as determined by Bank Indonesia; this standard is obliged to be followed by industry players using NSICCS for debit cards, and using SAM Multi Applet for e-money.

The standard institution has already been formed and run by the Indonesian Association for Payments System (ASPI). In the next steps, the standard institution will be directed to form a legal entity with a professional, competent, and independent management.

As for the switching institution, it is tasked with organising safe and efficient transaction data processing for domestic payments. During the launch of the NPG, Bank Indonesia has declared four companies as an organiser of domestic switching: Jalin Pembayaran Nusantara, Artajasa Pembayaran Elektronik, Rintis Sejahtera, and Alto Network.

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“The switching institution that we are talking about here is different to what we have always known all along, as the switching is now meant for NPG. There are four institutions that have followed the criteria set by Bank Indonesia. In order to implement NPG, we could have done it by ourselves, but we prefer to involve a player on-the-ground. We will also side with the four companies had they want to partner with foreign partners.”

Lastly, the services institution with its four main tasks, which includes securing transaction by ensuring end-to-end transaction data encryption, handling transaction dispute, and expanding the acceptance of cashless instrument.

The services institution was formed and owned by NPG switching institution and subsidiaries of main industry players such as BRI, BNI, Bank Mandiri, and BCA, which take control 75 per cent of national retail payments transactions through a consortium. According to Martowardjojo, the setting up of the consortium began with an agreement signing and is expected to be in the form of a legal entity, so that it will be able to fully operate by July 2018.

For the early stages, the central bank has signed four documents to mark the begining of the NPG operations: The consortium deal to launch the services institution, the interconnectivity agreement between four main NPG switching institutions, credit card interoperability agreement, and e-money interoperability agreement.

The article Rangkaian Roadmap E-Commerce: Bank Indonesia Resmikan Gerbang Pembayaran Nasional was written by Marsya Nabila and first published in DailySocial. English translation and editing by e27.

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