Implementation of QRIS in 4 ASEAN Countries: Status Quo and Upcoming Challenges

Disclaimer: The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of the organization or its members where the author is currently working.

(Illustration of QRIS at an F&B Merchant, photo by QRIS.id)

Introduction

Digitalization and the rapid development of communication and informatics technology have changed various aspects of life, one of which is the economic aspect, especially the payment system.

One of the most prominent examples of digitalization is the development of a Quick Response Code (“QR Code”) for making payments. A QR Code is a type of digital code used to store or link information. QR Codes are used to provide further information about something, one of which is for payment systems and services.

The utilization of QR Code for payment is increasingly popular in the midst of the Covid-19 pandemic. Apart from being fast, simple, and easy, QR Codes are also safer because people don’t need to touch money, payment terminals, and other equipment to settle a transaction other than their own devices.

In Indonesia, the use of QR Code for payment is known as QR Code Indonesian Standard (“QRIS”). QRIS is one of the access channels to the Source of Funds and is one of the components of the Payment System. Other examples of Access to the Source of Funds are Electronic Data Capture and Automated Teller Machine.

As an actualization of financial integration in the ASEAN region, Bank Indonesia together with central banks from 4 ASEAN countries namely Thailand, Malaysia, Singapore, and the Philippines are seeking cooperation in the utilization of Cross Border Payment with QRIS, Open Application Payment Interface (“API”), and Fast Payment adjusted to Local Currency Settlement (“LCS”), hereinafter together referred to as “QRIS ASEAN Cross Border Payments Initiative”.

The initiative was conveyed by Bank Indonesia in a virtual conference in July 2022. With respect to the QRIS ASEAN Cross Border Payments Initiative, this article will provide you with key information about the initiative, the status quo of regulation and implementation, as well as upcoming challenges that the public needs to expect and be aware of so that this initiative can be realized as intended.

The Status Quo of QRIS Regulation and Implementation

As of July 2022, we note several regulations relevant to QRIS are as follows:

As mentioned earlier, QRIS is one of the access channels to the Source of Funds and is one of the components of the Payment System. QRIS as a Payment QR Code has the main function to display the identity of one of the parties in processing payment transactions. QR Code Payment consists of:

1. A static Payment QR Code, i.e. a Payment QR Code that is issued before a transaction is initiated and can be scanned repeatedly to facilitate different payment transactions. Generally, it only contains data on the identity of the merchant.
2. Dynamic Payment QR Code, which is a Payment QR Code issued when a transaction has been initiated and scanned to facilitate only one particular transaction. Generally, it contains information data regarding the identity of the merchant or user and information regarding the transactions carried out such as the transaction nominal.

Meanwhile, the QR Code Usage Model consists of:

1. Merchant Presented Mode, the Merchant presents the QR Code to then be scanned by the User
2. Customer Presented Mode, the User displays the QR Code to then be scanned by the Merchant.

QRIS transactions use sources of funds in the form of deposits and/or payment instruments in the form of debit cards, credit cards, and/or electronic money using server-based storage media or media that utilizes technology and/or electronic services that enable data storage of sources of funds and/or payment instruments such as proprietary channels and electronic wallets.

Payment Service Provider — Penyedia Jasa Pembayaran(“PJP”) and Payment System Infrastructure Provider — Penyedia Infrastruktur Sistem Pembayaran (“PIP”), both of which are referred to together as Payment System Service Provider — Penyelenggara Jasa Sistem Pembayaran, which processes payment transactions by QRIS as well as facilitating payment transactions to service users and/or providing infrastructure as a means of transferring funds, generally is required to fulfill the following requirements:

1. Obtain approval from Bank Indonesia based on the application and fulfillment of the following aspects:
   a. operational readiness
   b. system security and reliability.
   c. implementation of risk management.
   d. consumer protection.
2. Obtain a license as a PJP for the issuance of payment instruments using cards and/or electronic money.
3. Obtain a license as PIP for payment transaction processing operations.
4. Obtain another license and/or permit as relevant, e.g. if the PJP that issues payment instruments using cards and/or electronic money is also a Financing Company, then it needs to obtain the relevant business license from the Financial Services Authority — Otoritas Jasa Keuangan.

QRIS Transaction nominal is limited to a maximum of IDR 10,000,000.00 (ten million Rupiah) per transaction. However, Issuers of debit cards, credit cards, and/or electronic money (“Issuer(s)”) may set daily and/or monthly cumulative nominal limits for QRIS Transactions made by each QRIS User. The cumulative nominal limit is determined by taking into account the Issuer’s risk management.

Furthermore, QRIS also serves as the national standard for QR Code Payments in Indonesia is set by Bank Indonesia. The management of QRIS is carried out by a Standard Institution — Lembaga Standar that has been established by Bank Indonesia. QRIS consists of technical and operational specifications as outlined in the QRIS document, which includes:

a. quick response code for payment.
b. interconnection.
c. other technical and operational.

Payment System Service Providers and Switching Institutions are required to ensure that all QRIS Transaction processing is carried out in accordance with the technical and operational specifications of QRIS.

The inability of PJP and PIP to fulfill obligations, including but not limited to QRIS specifications, may be subject to administrative sanctions stipulated in their respective Bank Indonesia regulations.

QRIS ASEAN Cross Border Payments Initiative

The financial integration initiative in the ASEAN region was initially presented at the Finance Ministers and Central Bank Governors Meetings (“FCMBG”) of the G20 Presidency in February 2022. The core and results of the FCMBG include:

1. Affirmation of the financial integration of the ASEAN region as a priority agenda of the G20 Presidency.
2. Development of Cross Border Payment with QRIS, Open API, and Fast Payment adjusted to LCS.
3. Trial of QRIS ASEAN Cross Border Payments Initiative in Malaysia and Thailand through collaboration between Bank Indonesia and Bank Negara Malaysia and Bank of Thailand.
4. Utilization of QRIS ASEAN Cross Border Payment to improve the welfare of Micro, Small, and Medium Enterprises (“MSME”) and accelerate the Recovery of the Tourism sector.

In July 2022, Bank Indonesia in a press conference said it would realize and expand the implementation of the ASEAN Cross Border Payment Initiative in 4 ASEAN countries namely Thailand, Malaysia, Singapore, and the Philippines. Indonesia, Malaysia, Singapore, Thailand, and the Philippines' collaboration will make them the pioneers of ASEAN regional payment connectivity. These five countries or ASEAN Five are countries that already have a good digital infrastructure, thus cross-border transactions can be realized immediately and without a significant impediment.

QRIS ASEAN Cross Border Payments Initiative can provide the following benefits:

1. Expand and strengthen the implementation of LCS or bilateral payment transaction settlement using local currency to reduce dependence on the US dollar currency for bilateral trade transaction settlement and maintain the stability of the local currency value.
2. Ease, convenience, and speed of payment since users will no longer need to carry and exchange cash.
3. Faster, cheaper, and more transparent cross-border remittances.
4. Accelerate the increase in the value of MSME and tourism recovery in participant nations, in particular, MSME and tourism in Indonesia.
5. Strengthen the economic cooperation between nations in the ASEAN region.

However, based on information from undisclosed sources at Bank Indonesia, there are currently no regulations and/or policies regarding the implementation of the QRIS ASEAN Cross Border Payments Initiative. The ASEAN Five are currently anticipating the signing of a cooperation agreement related to the QRIS ASEAN Cross Border Payments Initiative at the G20 Leaders’ Meeting in November 2022.

Currently, regulations relevant to the use of QRIS outside the territory of Indonesia are regulated in the PADG QR Code National Standard.

In principle, QRIS transactions can be carried out using the source of funds administered and/or payment instruments issued outside the territory of Indonesia through cooperation between Payment System Service Providers and foreign parties who administer these sources of funds and/or issue payment instruments.

Payment System Service Providers are required to ensure that the settlement of payment obligations is carried out in Indonesia using the Rupiah. The abovementioned cooperation must obtain approval from Bank Indonesia and fulfill the following aspects:

1. Legality and profile of the foreign counterparty.
2. Competency in the foreign counterparty, including experience in organizing payment system service activities.
3. The performance of the foreign counterparty, including information and/or assessment regarding the financial condition and track record of the parties to be invited to cooperate.
4. Security and reliability of systems and infrastructure, including information and/or assessments related to the security of systems and infrastructure used.
5. Legal, including the legality of the scope of cooperation, rights and obligations of each party, implementation plan, and the period of cooperation.

Fulfillment of requirements on aspects of legality, competence, performance, as well as security and reliability of the infrastructure system, is deemed to have been fulfilled by submitting a permit and/or approval from the local authority.

Furthermore, in addition to the issue of the absence of regulations or policies that regulate, Bank Indonesia conveys 4 potential obstacles to Cross Border Payments:

1. Infrastructure readiness of each country.
2. Time difference which results in differences in bank working hours.
3. Transparency in providing cross-border transactions.
4. Differences in access and exposure to digital technology between countries

What to Expect in The Upcoming Months Leading to the G20 Leaders' Meeting

Currently, Bank Indonesia has not set any new regulations and/or policies related to the QRIS ASEAN Cross Border Payments Initiative and is waiting for the signing of the cooperation agreement at the G20 Leaders’ Meeting in November 2022.

As of July 2022, based on publications submitted by Bank Indonesia, Bank Indonesia has not been able to say for certain when the QRIS ASEAN Cross Border Payments Initiative can be launched. However, several important things to note regarding the QRIS Cross Border Payment trial milestone based on Bank Indonesia's public statements are as follows:

1. Indonesia has collaborated with Thailand, involving 4 Indonesian switching institutions, 10 Indonesian PJP Issuers, 3 Indonesian Appointed Cross Currency Dealer Banks (“ACCD”), as well as 1 Thai switching agency and 3 Thai PJP Issuers. The QR Cross Border Trial has entered the trial phase since August 17, 2021.
2. Indonesia has collaborated with Malaysia, which involved 4 Indonesian switching institutions, 10 Indonesian PJP Issuers, 2 Indonesian ACCD Banks, as well as 1 Malaysian switching agency and 2 Malaysian PJP Issuers. The QR Cross Border Trial has entered the trial phase since January 27, 2022.
3. To date, the trials have involved notable bank and non-bank financial institutions such as Bank of Thailand, Bank Negara Malaysia, Bank Central Asia, Bank Mandiri, Bank Negara Indonesia, Bank Mega, Regional Development Bank Bali, Bank Permata, Bank Sinarmas, Bank Syariah Indonesia, CIMB Bank Berhad, Public Bank Berhad, LinkAja, Ottocash, ShopeePay Indonesia, DANA, and Razer Merchant Services.
4. The institutions involved remain positive and optimistic because so far the QRIS Cross Border trial has gone well, both in terms of connection, switching, and settlement.
5. As of April 2022, Bank Indonesia recorded the addition of 7.6 million new QRIS users. The addition covers 50.8% of the 2022 target.

Based on facts and information regarding the QRIS ASEAN Cross Border Payments Initiative presented at the FCMBG in February 2022 and the Bank Indonesia Press Conference in July 2022, identification and review of the applicable laws and regulations, and also identification of potential issues based on reports and information provided by Bank Indonesia and financial institutions, we noted in the upcoming months ahead of the G20 Leaders’ Meeting in November 2022, which need to be anticipated are as follows:

1. The signing of the QRIS ASEAN Cross Border Payments Implementation Cooperation Agreement in November 2022.
2. Press Releases and/or Reports from Bank Indonesia regarding the results of the QRIS Cross Border Payment trial in Malaysia and Thailand.
3. Amendments to Bank Indonesia Regulation related to Payment Systems, especially regarding QRIS which accommodates but is not limited to more comprehensive arrangements regarding Cross Border Payments, cooperation between Indonesian and Foreign Payment System Service Providers, as well as QRIS Standardization and Certification.
4. Update on the operational and technical specifications of QRIS that have been adapted and/or adjusted to the QR Code Standard in participating countries, considering that the infrastructure in each country can be different so standardization is likely needed.

(Illustration of EPC QR Codes Payments Standardisation and Governance Guide, photo by EPC).

As a reference, a number of banks, non-bank financial institutions, associations of financial institutions in the European Union region that are members of the European Payments Council (“EPC”) have established the “Standardization and governance of QR Codes for Instant Payments at the Point of Interaction (IPs at the POI)”. These standards provide guidance for Payment System Service Providers regarding the QR Code format, QR Code coding, interoperability with other mobile payment platforms, international standardization, registration, and so on.

Even though the EPC is a non-profit institution and is not a central bank or a geopolitical organization, Bank Indonesia and ASEAN can refer to and learn from the EPC which has a vision similar to the vision of Financial Integration in the ASEAN Region. EPC has the vision to advocate for a Single Euro Payment Area through discussions with stakeholders as well as research and development of payment systems.

References:

Law №23 of 1999 on Bank Indonesia as amended lastly by Law №6 of 2009 on Stipulation of Government Regulation in Lieu of Law — Penetapan Peraturan Pemerintah Pengganti Undang-Undang №23 of 1999 on Bank Indonesia into Law.

Bank Indonesia Regulation No. 22/23/PBI/2020 of 2020 on Payment System.

Bank Indonesia Regulation No. 23/6/PBI/2021 of 2021 on Payment Services Provider.

Regulation of Members of the Board of Governors (of Bank Indonesia) No. 21/18/PADG/2019 on the Implementation of the Quick Response Code National Standard for Payments as lastly amended by Regulation of the Members of the Board of Governors (of Bank Indonesia) №24/1/PADG/2022 on Second Amendments to the Regulation of Members of the Board of Governors (of Bank Indonesia) Number 21//18/PADG/2019 on the Implementation of the Quick Response Code National Standard for Payments.

Bank Indonesia. Transaksi QR Antar Negara Dukung Integrasi Keuangan ASEAN. https://www.bi.go.id/id/publikasi/ruang-media/news-release/Pages/sp_245022.aspx.

Bank Indonesia. Joint Press Release: Launch of The Cross-Border QR Payment Linkage Between Indonesia and Malaysia. https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_242222.aspx.

Bank Indonesia. Bahan Sosialisasi QRIS. https://www.bi.go.id/id/edukasi/Documents/Bahan-Sosialisasi-QRIS.pdf .

Bank Mandiri. Mandiri Local Currency: Local Currency Settlement. https://www.bankmandiri.co.id/mandiri-local-currency

European Payments Council. About Us. https://www.europeanpaymentscouncil.eu/about-us.

European Payments Council. Standardization and governance of QR Codes for Instant Payments at the Point of Interaction (IPs at the POI). https://www.europeanpaymentscouncil.eu/sites/default/files/kb/file/2021-11/EPC212-21v1.1%20Standardisation%20and%20governance%20of%20QR-codes%20for%20IPs%20at%20the%20POI.pdf.

Finansial Bisnis. BI Ungkap 4 Tantangan Transaksi Pembayaran Lintas Negara. https://finansial.bisnis.com/read/20220707/11/1552471/bi-ungkap-4-tantangan-transaksi-pembayaran-lintas-negara.

Keuangan Kontan. Begini Perkembangan Ujicoba Transaksi QRIS Cross Border dengan Malaysia dan Thailand. https://keuangan.kontan.co.id/news/begini-perkembangan-ujicoba-transaksi-qris-cross-border-dengan-malaysia-dan-thailand .

Macmillan Dictionary. Quick Response Code. https://www.macmillandictionary.com/dictionary/british/qr-code#:~:text=Quick%20Response%20code%3A%20a%20code,access%20number.

PayPal. Benefits of QR Code Payments. https://www.paypal.com/us/brc/article/benefits-of-qr-code-payments.

Republika. QR Cross Border Dukung Integrasi Keuangan di Kawasan ASEAN. https://www.republika.co.id/berita/r7c8bf383/bi-qr-cross-border-dukung-integrasi-keuangan-di-kawasan-asean.

Tempo.Co. QRIS Payment Service to Be Available in 4 ASEAN Countries. https://en.tempo.co/read/1609774/qris-payment-service-to-be-available-in-4-asean-countries.

Tempo.co. Tak Perlu Repot Bawa Uang Tunai, WNI Bisa Akses Layanan QRIS di 4 Negara ASEAN. https://bisnis.tempo.co/read/1609712/tak-perlu-repot-bawa-uang-tunai-wni-bisa-akses-layanan-qris-di-4-negara-asean