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Protecting the Sovereign Payments System – Academy

Online Niel November 12, 2024

In his inaugural speech as Indonesia’s new president on October 20, Prabowo Subianto pledged his commitment to Indonesia’s golden future, when the country will be strong, independent and sovereign. “We are ready to work hard for Indonesia’s golden future, to be a strong, independent, sovereign, fair and prosperous nation. We don’t want to disrupt anyone, and we don’t want to be disrupted by any other nation.”

This statement emphasizes not only the spirit of independence, but also the need for economic sovereignty, including in the field of payment systems. Here, sovereignty means Indonesia’s ability to manage its economic affairs independently without relying on foreign entities, covering crucial sectors such as law enforcement, social issues and, most importantly, the digital economy.

In the digital economy, sovereignty takes on increased importance as digital payment transactions continue to grow. Bank Indonesia (BI) reports that digital payment transactions exceed three billion per month, totaling Rp 6.5 trillion ($419 million). This volume increases annually by approximately 20 percent.

However, despite this growth, a significant portion of these transactions still depend on foreign main networks. For example, about one-third of debit card transactions rely on foreign networks, and most credit card transactions are processed through foreign payment systems.

The effort to strengthen the sovereignty of the payment system began with the launch of the National Payment Gateway (GPN) in 2017. The GPN enables interbank debit card transactions in Indonesia without routing through foreign networks, reducing transaction costs while promoting a robust domestic payments ecosystem. This initial step was essential in reducing reliance on foreign infrastructure and asserting Indonesia’s sovereignty over its own payment systems.

The next major development occurred in 2019 with the introduction of the Indonesian Quick Response Code Standard (QRIS). QRIS enables interoperability between QR-based payment service providers, allowing consumers to transact by simply scanning a standardized QR code, regardless of the payment application they are using.

QRIS offers unique advantages in efficiency. Unlike debit or credit cards that require electronic data capture (EDC) devices, QRIS only requires a QR code sticker, making it a much more accessible and affordable solution for micro, small businesses and medium-sized enterprises (SMEs). This initiative not only accelerates digital transformation but also serves as a vital strategy to reduce dependence on foreign payment networks.