Bank Indonesia (the central bank—BI), is the country’s only provider of interbank electronic payments. There has been a dramatic increase in card-based payment instruments. BI reports that in 2007 the value of ATM and debit-card transactions increased by more than 41.6%, to Rp1,154trn; credit-card transactions rose by 31.6%, to Rp72.7trn.The number of ATM machines reached 19,607 in 2007, up 16% from 16,900 machines at end-2006. The growth largely reflects the expansion of the ATM networks and card-based services offered by banks. Credit and debit cards are widely accepted in most areas, including tourist facilities and restaurants.Previously, the purview of only foreign or joint-venture banks, most banks now provide a range of cash-management facilities for their corporate customers, which are useful in Indonesia given uncertainties about inflation, foreign exchange and interest rates. Many banks offer sophisticated technologies in credit/debit cards and telephone or Internet banking. Although most banks have an extensive network of basic ATM services throughout Indonesia, foreign and joint-venture banks have ATM networks that are usually limited to major cities.Conventional banking transactions still outnumber electronic transactions, but most banks offer phone banking and online banking, though concerns remain over the security of online transactions. A few banks have started to enjoy success in this area. Bank Internasional Indonesia (BII), purchased by Malaysia’s Maybank in March 2008, was the first entrant into the online banking arena, allowing customers to check balances and account activity, transfer funds, pay bills, and make telegraphic transfers to domestic and overseas banks. Customers can also open savings, current and time-deposit accounts, and apply for credit cards via the BII website.Bank Central Asia (BCA), the operator of Indonesia’s most sophisticated ATM network, adopted electronic banking in March 2001. The service initially targeted individual customers and then expanded to corporate customers, offering an online payroll-management system. The service combines online and ATM systems to allow customers to pay for several types of bills. Each bank uses Internet banking software provided by Hewlett Packard and Microsoft (both US), and each employs the Secure Electronic Transaction (SET) system for online transactions. SET is regarded as the industry standard; it works by providing encryption technology that prevents interception of online banking and credit-card transactions. Nevertheless, police uncovered a major credit-card counterfeiting ring in early 2008, and regulators responded by accelerating the schedule for requiring banks to integrate smart chips on all credit cards. Citibank (US) has already begun implementing chips on its credit cards.Bank Mandiri entered the market in 2004 and along with BCA has become one of the market leaders. Both banks are employing secure PIN (personal identification number) generation technology called VASCO to help overcome security concerns.Banking via SMS (Short Message Service text messages) is rapidly developing. Users can conduct most banking transactions, including fund transfers and bill payments, via a cellular phone. BCA has operated a mobile-banking service since 2001, working with Excelcomindo, Indonesia’s third-largest mobile-phone operator. Bank Negara Indonesia, Bank Mandiri and Bank Mega, among others, also offer the service.The newly enacted Law on Information and Electronic Transactions (Law 11/2008) represents an important step forward for electronic commerce in Indonesia. It provides a legal basis for information and electronic transactions, also legalising electronic signatures as valid for commercial use. The law defines regulations concerning domain names, electronic intellectual property rights, privacy and content (anti-pornographic) regulations. Moreover, it empowers legal authorities and law enforcement to conduct investigation and enforcement concerning electronic information and transactions.SOURCE: Country Finance

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