Payment Innovation: Bank Indonesia

The introduction of quick response (QR) codes has made it easier for consumers to make payments with mobile devices. It is much easier to scan a code than type – especially for making payments that require characters in another language.

As part of Indonesia’s Payment System 2025 Vision – introduced in May 2019 – Bank Indonesia has launched a national standard for QR codes, dubbed the Quick Response Code Indonesian Standard (QRIS). This standard will be used for all electronic payments that use QR codes, including mobile banking and electronic wallets.

“The aim is to make QRIS interconnected and lead to interoperability among payment providers and any source of fund,” says Ricky Satria, deputy director of Bank Indonesia’s Department of Payment Systems Policies and Supervision, noting that one of the key aims of the standard is to prevent fragmentation in the emerging sector. At the end of August 2019, there were 26 QR code-based payment service providers operating with different models and specifications in Indonesia.

However, since January 1, 2020, merchants no longer have to show a different code for every different e-wallet, and customers can use any compliant wallet at any merchant that accepts QR payments. QRIS was launched in August 2019 after pilots conducted in late 2018 and April and May 2019.

The standard was created by Bank Indonesia and the Indonesian Payment System Association, and is largely modelled on the Europay, MasterCard and Visa Standard.

Under QRIS, a payment service provider will need approval from the central bank to provide QR code-based payment services. It will also need to obtain a QRIS document, which contains details of the technical and operational specifications of the code.

“The implementation of QRIS will be carried out in stages under prudential principles in its implementation,” explains Satria. The central bank has chosen to target small and micro merchants with its initial roll-out. Medium and large merchant chains will then be invited to use the standard for retail payments and card-based payments. Currently, the maximum nominal amount for each transaction is limited to 2 million Indonesian rupiah.

The final stage will see it expanded for cross-border payments with the aim of helping tourists make payments. As of October 2020, 44 payment service providers have been approved by the central bank to implement QRIS; this consists of 24 banks and 20 non-banks.

The central bank hopes the new standards will not only benefit consumers, but also encourage competition in a new sector that has come to be dominated by new players.

Chinese e-wallet giants Alipay and WeChat Pay have recently entered the local market by partnering with local banks, but Indonesia is also home to large local providers including Ovo, GoPay and Doku.

QRIS’s interoperability will allow banks and smaller e-wallet firms to spend less time onboarding merchants to focus on getting more users for their platforms. More than 5.1 million merchants already display QRIS-compliant codes.