BI Relaxes Requirements for Digital Banking Services

Bank Indonesia (“BI”) has just issued Regulation No. 18/17/PBI/2016 (“SecondAmendment”), which amends BI Regulation No. 11/12/PBI/2009 (“2009 Regulation”) on Electronic Money (“E-Money”). [1] Through this Second Amendment, BI has now relaxed the various requirements which have to be met by issuers of E-Money when entering into agreements relating to digital payments or financial services (Layanan Keuangan Digital/LKD) with any third parties. In addition, the Second Amendment also strengthens the security of E-Money transactions by obliging issuers of E-Money to implement Customer Due Diligence measures in regard to holders of E-Money.The Second Amendment is of relevance to issuers of E-Money, including banks, non-bank institutions, telecommunications companies and so forth.Organizing LKDE-Money can be issued by both banks and non-bank institutions (“Issuer”). [2] Two types of E-Money are described under the 2009 Regulation, namely: 1) Registered E-Money, which involves holders being registered with Issuers; and 2) Unregistered E-Money, which doesn’t require holders to be registered with Issuers. [3] An Issuer may enter into cooperation with a third party for the organization of electronic payments or financial services/LKD. [4] Any such cooperation can be undertaken between Issuers and transfer-fund organizers/Indonesian incorporated-agent entities and/or individual agents (“LKD Agent”). [5] Cooperation with individual Agents, however, can only be engaged in by Issuers in the form of Banks. [6] In this regard, the Second Amendment sets out more flexible requirements for banks as Issuers as regards cooperation with individual LKD Agents in comparison with the 2009 Regulation, as detailed in the table below: [7]