Ronald Waas: Digitization in a growing economy
Keynote speech by Mr Ronald Waas, Deputy Governor of Bank Indonesia, at the Visa Card
Managers Annual Meeting, Bali, 27 February 2015.
* * *
Distinguished,
• President Director of Visa and his team for organizing this event,
• People of Payment System Industry,
Ladies and Gentlemen,
•
Good Morning and May God Bless Us All, Om Swastiastu,
1. To begin this speech, please allow me to invite all of us to praise God the Almighty
for his blessings so that we meet in a healthy and favorable condition in Sofitel
Hotel, Nusa Dua - Bali, in the Visa Card Managers Annual Meeting.
2. I welcome the theme "Digitization in a Growing Economy", particularly because
digital technology has been a consistently increasing part of our daily lives at the
local, Asian, and international levels.
3. On this great occasion, I would also like to extend my appreciation to Visa and all
System Payment people who are present here and constantly show their
commitment to promote a better Payment System in Indonesia in the future.
Ladies and Gentlemen, distinguished guests,
Regulatory function
4. On several occasions of interacting with industries and the wider community, I
always quote a famous American writer in the beginning of the 19th century, James
F. Cooper: "the very existence of government at all, infers inequality". The most
fundamental essence of the existence of authorities is to guarantee that any
unbalanced social and economic establishments in the community may be managed
for the welfare of the wider community.
5. This adagio is important, primarily related to the massive potentials of Indonesian
domestic market with a consistently increasing economic capacity. Without
acceptable management, our nation will never be "the host" in its own country.
6. Therefore, in line with the complex social plurality and highly dynamic digital
technology development, the authority's function as a control tool to organize
people's life to become more strategic, especially to achieve a completely safe,
smooth, and efficient payment system.
Ladies and Gentlemen, distinguished guests,
Indonesia's economic development
7. Millennium 21 is a new horizon which opens many opportunities for Indonesia to
become a country providing better welfare. With such determination, Bank Indonesia
will keep strengthening its contribution to the national economy.
8. In the last few years, the magnitude of global environmental change keeps
happening to the domestic economy. Amidst such unfriendly strategic environment,
our economic foundation needs improvement and strengthening in some parts.
9. History shows that although Indonesia's economy keeps experiencing turbulence, it
always manages to survive by creating stabilization and even to rise by recording
high growth. The year 2011 marks the end of Indonesia's recovery transition period
by successfully entering into the category of middle income country with per capita
income of over USD 3,000. The World Bank has ranked Indonesia's economy 10th
in the world through Purchasing Power Parity (PPP).
10. It is certainly the pride of Indonesia as a big nation. However, it also leaves a
challenge and work for all of us to allow the wider community to enjoy the benefits of
the nation's huge economic capacity.
Ladies and Gentlemen, distinguished guests,
Domestic market potential
11. We realize that the huge potential of Indonesia's market has not been optimally
explored. In spite of the increasing use of payment system, a survey by McKinsey &
Company (2013) shows that the volume of use of cash for retail transactions is
still dominant, i.e. 99.4%, which is one of the highest compared to ASEAN peer
countries.
12. In such condition and in line with the digitization trend development of Indonesian
people and the international world, we are confident that the future potentials of
electronification increase will become higher. Some factors may boost such
payment system potentials.
13. First, payment system development in Indonesia keeps increasing. Statistics show
that non-cash transactions grow by 22% in average annually (in terms of volume)
and 21% (in terms of transaction value). Out of all non-cash instruments, the most
rapid development is shown by electronic money by around 30% in 2014.
14. Second, digitization trend through the use of telecommunication device by the
community, including in remote areas, consistently indicates an increase, which now
has reached 270 million1 users. Penetration of internet users in Indonesia is also
very high, reaching 74.6 million in 20142.
15. Third, Indonesia has very high population of around 250 million people or half of the
total population of ASEAN countries. With the increasing number of middle class
growth reaching 150 million people in 2014, more than 50% of Indonesian people
may potentially become payment system users.
16. Fourth, we record that payment infrastructure development also shows
significant growth every year, such as ATM, EDC, and use of electronic channels,
e.g. mobile banking, internet banking, and phone banking. Payment infrastructure
growth of ATM and EDC in the last two years reaches 14% and 50% respectively.
17. Fifth, Non-Cash National Movement (GNNT) launched in 14 August 2014 gains
strong supports from various Government institutions. Bank Indonesia consistently
makes extensification and intensification programs for effective GNNT program.
Ladies and Gentlemen, distinguished guests,
Mandates of Bank Indonesia
18. As a payment system authority, the mission of Bank Indonesia is to manage and
maintain safe, efficient, and smooth Payment System and Money Management
through access expansion and by considering the national interest. The mission will
be achieved through two important aspects: first, Payment System strengthening
and second, proactive in initiating cooperation and collaboration.
19. Payment system strengthening is specified in four pillars: first, effective and efficient
money management system; second, payment electronification expansion; third,
reliable and safe Payment Infrastructure; fourth, strong and rigorous supervision and
oversight. On this occasion, we will focus more on exploration of the second pillar,
i.e. Payment Electronification Expansion.
20. In relation to the Payment Electronification Expansion, one of the visions of Bank
Indonesia in non-cash sector is to realize a society with strong preference to
using non-cash payment instruments and facilities in making financial
transactions, also known as Less Cash Society.
21. The realization of Less Cash Society is important to boost more efficient economy,
in addition to promoting better governance in financial management by the
community, businesses, and government institutions.
Ladies and Gentlemen, distinguished guests,
Electronification
22. In the beginning, we frequently use the term Digital Payment Services; however, in
line with the focus and efforts to achieve the mission in non-cash sector, we
consider Electronification as a more appropriate term.
23. Electronification is an incorporated and integrated effort to change cash
payment into non-cash payment. Expanded use of electronification is defined as
an effort to change most payment mechanism from physical into digital or from
manual into electronic and to increase limited financial access to wider (inclusive)
financial access.
24. Expanded payment electronification strategy is made through an integrated
campaign effort involving all stakeholders. We will seek facilitation with the
Government and the relevant institutions which may potentially serve as the catalyst
of use of payment system electronification.
25. Expanded payment electronification is also an integral part of financial inclusion
policy to increase the access of unbanked people to financial institutions. Through
the use of information technology, we expect that the launched electronification
program may serve as a drive to answer this challenge by providing services to such
people in a safe and efficient manner.
Ladies and Gentlemen, distinguished guests,
Bank Indonesia' policy to promote less cash society
26. Bank Indonesia's authority in payment system is embodied in the following 4 roles:
(1) establishment of policy, (2) authority in the entry and exit policy of payment
system industry, (3) payment system operators, and (4) oversight. Through such
4 roles, we may determine the future direction of payment system development.
27. The established policy is directed to achieve targets of non-cash transactions of
up to 2.4 times of GDP by 2015 and 3 times of GDP by 2016. The entry and exit
policy aims to make the payment system industry healthier and ready to compete
with the global industry. As an operator, Bank Indonesia consistently builds a safe
and reliable payment system following the requirements of the community and
payment industry. Lastly, Bank Indonesia continuously strengthens payment
system oversight to ensure any payment system development innovation is
followed by good risk mitigation aspect which in turn will increase public trust in
non-cash payment system.
28. To boost non-cash expansion, Bank Indonesia has launched less cash society
achievement strategy in 4 focus activities, namely (1) change of public culture
towards non-cash transactions, (2) expanded services of non-cash payment,
(3) development of supporting infrastructure, and (4) alignment of regulations.
29. First, culture change strategy will be realized through an integrated campaign
involving all stakeholders. We will seek facilitation with the Government and the
relevant institutions which may potentially serve as the catalyst of use of payment
system electronification. The efforts made jointly by Bank Indonesia and the industry
among others are e-ticketing cooperation in public transportation sector and
development of Government's assistance distribution (government to people).
30. On the other hand, we are also seeking to increase public awareness on non-cash
transactions through a sustainable education program, like integration of non-cash
study into the education curriculum.
31. Second, expanded payment electronification is also an integral part of financial
inclusion policy to increase the access of unbanked people to financial institutions.
Through the use of information technology, we expect that the launched
electronification program may serve as a drive to answer this challenge by providing
services to such people in a safe and efficient manner.
32. Bank Indonesia has presently expanded payment electronification through
development of Electronic Bill Presentment and Payment to integrate bill payment.
33. Third, to realize reliable, efficient, and safe payment infrastructure through
National Payment Gateway (NPG) and National Scheme. NPG infrastructure
development eventually aims to increase PS service efficiency, including in terms of
cost, to add PS service coverage through interconnection and interoperability
among operators, and to build independency of national retailers PS by domestic
processing.
34. PS independency closely relates to the national standard implementation. Bank
Indonesia will ensure that the set standard is in line with the national interest and
implemented according to the determined time target. We all have started it and it is
our obligation to complete it. I am aware that something we originally start may have
downsides, but it is our task to cover those downsides.
35. Fourth, strong and transparent regulations and oversight must be applied to all
payment system operators. In the aspect of oversight of payment system
instruments, BI will surely strengthen the capability of payment system oversight.
36. In addition, we will strengthen coordination and consolidation between policy
authorities and payment system businesses. The step is realized through a plan
to establish a high level coordination medium consisting of payment system
authority and businesses. Intensive coordination and consolidation is expected to
synergize various interests and direct industries for their efficient movements, to
promote favorable climate, and to strengthen customer protection by upholding the
national interest.
Ladies and gentlemen,
Closing
37. To conclude my speech this morning, I wish to remind us all that payment system
development must be built under the principle of a sound competition to minimize
any negative impacts potentially resulting in public confusion, to open access
reachable by domestic actors and the wide community, and to eliminate
economic rent.
38. Particularly in connection with Expanded Electronification, I also wish to
reemphasize that the realization of the expected less cash society basically aims to a
cultural/behavioral change instead of system change. Therefore, improvement of
education quality for the public is the most strategic phase. The reason is only
through improvement of education quality we can open comparative excellence
window and build the foundation to reach excellent and prosperous Indonesian
society.
39. In this regard, Bank Indonesia as the Payment System Authority will seek to direct
the industry for their efficient movements, promote favorable climate for payment
system and settlement of financial transactions, and strengthen customer protection
by upholding the national interest.
40. I conclude this speech with the confidence that God will always be with us to support
and smooth our moves towards a better future.
Thank you.