JAKARTA (The Jakarta Post/Asia News Network): Bank Indonesia (BI) says it will introduce a domestic credit card system allowing for greater independence and lower fees, as transactions are settled locally rather than by foreign providers.
BI spokesperson Erwin Haryono said on Saturday (March 18) that the central bank had been in discussion with local industries and progress stood at 90 per cent, but he declined to reveal when the domestic credit card would be launched or what it would be called.
Erwin said a domestic credit card would have several benefits, notably lower fees, because offshore settlement and relying on foreign payment networks like United States-based Visa or Mastercard would no longer be necessary.
“Let’s say I bought something in Yogyakarta with a credit card. Usually, the settlement is done overseas, but now it can be done in Indonesia,” Erwin told reporters during a forum in Yogyakarta.
The announcement comes shortly after President Joko “Jokowi” Widodo called for the use of homegrown credit cards to increase the country's independence in financial transactions.
The President deems such independence essential to shield transactions from geopolitical fallout.
The US has long used economic tools, including disconnection from Western payment systems, to put pressure on countries perceived to be acting against its national interests. Russia has been on the receiving end of such measures especially following its invasion of Ukraine, but there have also been threats of so-called secondary sanctions against countries conducting trade with Russia.
US sanctions forcing Visa and Mastercard to render their services inoperable for cards issued in Russia left Russian citizens unable to use their credit cards both at home and abroad, including tourists in Bali who could no longer pay for hotels, food and other services on the tropical island.
“Having too much reliance on foreign providers is quite terrifying,” Erwin said.
BI plans to make it optional rather than mandatory for local banks to issue the domestic credit card, but Erwin said BI would ensure the scheme was competitive. The central bank vowed the domestic network would include sophisticated features, such as fraud detection, which existing players like Visa and Mastercard already had.
“The domestic credit card [scheme] cannot be realised overnight. It has to be as secure as its international counterparts,” Erwin said.
BI has embarked on various efforts to improve payment systems in the country, such as introducing its own domestic interbank system called GPN, which currently serves as the network for domestic debit cards.
Later, it introduced BI-fast, a retail payment infrastructure that can be accessed via smartphone apps to facilitate cheaper and faster transfers between banks.
The birth of the domestic credit card network is to be accompanied by the official launch of government credit cards that will be mandatory for state agencies and ministries for use in daily operations.
BI’s Erwin said the government credit card would use a domestic network and ensure all fiscal transactions within the government were more traceable, providing greater accountability in state spending.