News & Announcements

W&P Newsletter – Major changes to electronic money regulation, including new foreign ownership limit and restriction of holding multiple licenses in two different categories

I. Background

Ever since the Indonesian central bank (Bank Indonesia, “BI”) permitted the use of electronic money (e-Money) as a non-cash payment facility and issued Bank Indonesia Regulation No. 11/12/PBI/2009 on Electronic Money (“PBI 2009”), the use of e-Money has significantly increased in Indonesia[1], which in turn indirectly stimulate the advance of fintech transactions.

To provide greater protection of consumer’s interests, on 3 May 2018, BI revoked PBI 2009, and replaced it with Bank Indonesia Regulation No. 20/6/PBI/2018 on Electronic Money (“PBI 2018”).

There are several key points introduced by PBI 2018, with foreign ownership limitation being one of the most crucial matters regulated thereunder. Under the new PBI 2018, a foreign entity is now limited to a maximum ownership of 49% (direct or indirect) in a non-bank e-Money issuer. Any existing foreign entities with ownership exceeding such upper ceiling prior to the issuance of PBI 2018 are grandfathered, although they are required to immediately comply with the maximum foreign ownership limit set by PBI 2018 once they subsequently change their foreign shareholding composition.

We break down the major differences between PBI 2018 and PBI 2009 in Section II below, as applicable to non-bank institutions.

II. Comparison between PBI 2009 and PBI 2018

No. Category PBI 2009 PBI 2018
1. Issuer’s Minimum Issued and Paid-up Capital Requirement The minimum capital requirement is dependent on the specific line of business, for example: (a) finance; (b) telecommunication; (c) system and network provider; and (d) public transportation. A minimum of IDR 3 billion, to be increased in proportion to the issuer’s average floating fund.
2. Issuer’s foreign ownership limitation The foreign ownership limit is dependent on the issuer’s line of business, for example:  a software system provider (100% foreign ownership); or (b) a telecommunication network provider (a maximum of 67% foreign ownership). A maximum of 49% foreign ownership (whether direct or indirect). The status of indirect ownership is determined by BI at its sole discretion and judgement.

BI shall also have the absolute discretion to set stricter limitations/requirements upon considering the shareholders’ history, the issuer’s technology and scope of service.

3. Possibility to have multiple e-Money licenses No

PBI 2009 did not touch on the issue of multiple licenses.

Yes, as long as they are within the same category. For example, a company is allowed to hold both an issuer license (front-end) and an acquirer license (front-end) but is prohibited from concurrently holding an issuer license (front-end) and a switching operator license (back-end).
4. Restriction to become a Controlling Shareholder in multiple e-Money companies No Yes
5. Lock-up Period for a Controlling Shareholder No Yes, within 5 years from the issuance of the e-Money business license, except for certain circumstances, subject to BI approval.

III. Other Notable Stipulations under PBI 2018

    1. E-Money licences obtained before the enactment of PBI 2018 will remain valid for five years after the entry into force of this regulation (i.e. 4 May 2018).
    2. Open loop e-Money issuers with a floating fund of less than IDR 1 billion or closed loop e-Money issuers with a floating fund of at least IDR 1 billion must apply for a new license to BI no later than 6 months after 4 May 2018.
    3. A company holding more than 1 (one) license in two different categories (front-end and back-end) must relinquish or have one of its licenses revoked if it intends to apply for a new license to BI. This is to ensure that such company will only hold licenses in the same category.
    4. Existing non-bank issuers must comply with the minimum capital requirement as set out in point 1 section II above no later than 6 (six) months after 4 May 2018.

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