Voice of the Industry

Open Finance: Transforming payments in Indonesia

Monday 29 November 2021 08:21 CET | Editor: Alin Popa | Voice of the industry

Open Finance might just be the solution to transform Indonesia's payments infrastructure. Diego Rojas, Co-Founder and CEO of Finantier has a strong insight on the matter

Indonesia is one of the fastest growing digital economies in the world. Adoption of digital goods and services accelerated during COVID-19, with an estimated 80% of Indonesians now purchasing goods or services online. However, Indonesia’s poor digital payments infrastructure is still plagued by various frictions and inefficiencies. 

For instance, a 2018 McKinsey report estimated Indonesia’s ecommerce market to be worth at least USD 8 billion, with the potential of reaching USD 40 billion by 2023. However, 40% of ecommerce transactions are still paid for by cash or bank transfers, revealing that digital payment infrastructure has not kept pace with the growing need for digital payments. This presents an opportunity for Open Finance to transform payments infrastructure in Indonesia - and more.

At present, most payment systems in Indonesia are required to use local switching companies, which creates inefficiencies in payments transactions. For example, a key point of friction is the fee charged for processing inter-bank transactions. With inter-bank transfers, customers have several service options which all charge different transaction fees and rates. This article will examine improvements over real-time online (RTO) inter-bank transfers, which remain one of the most popular online payment methods in Indonesia, especially among MSMEs.


While having a national switch-provider system does come with certain merits, such as enhancing data security for regulators, the fees associated with a switch-provider system and RTO inter-bank transfers can serve as a major deterrent. Transaction fees for RTO inter-bank transfers are on average Rp. 6,500 (approximately USD 0.50), a not-insignificant figure for millions of Indonesian customers who typically bear the cost of the transfer as the payment initiator. 

The only way to avoid transaction fees is if the customer and the merchant use the same bank, thereby creating an intra-bank transfer versus an inter-bank transfer. Intra-bank transfers also usually have same-day settlement times, an attractive value proposition to merchants. However, this requires merchants to open multiple different bank accounts to match all potential customer bank accounts, which can be difficult for MSMEs to manage. With more than 100 banks in Indonesia spread across several geographies and servicing various segments, rising demand for fee-free payment solutions outside of opening multiple accounts for intra-bank transfers puts pressure on financial institutions in Indonesia. 

Payment Gateways benefit merchants by lowering transaction fees

Payment gateways have emerged as one solution for lower-friction, lower-fee payments for customers. Payment gateways serve as a direct intermediary between customers and merchants by depositing the transaction in their own account at the customer’s bank, then disbursing the transaction amount to the merchant from their account at the merchant’s bank, thereby leveraging intra-bank transfer rates - that is to say, fee-free transfers. 

Payment gateways generate revenue by charging merchants a recurring subscription fee or processing fee per transaction in return for enabling merchants to accept a wider set of payment methods without the hassle of managing several bank accounts themselves. In short, transactions are transferred from the customer to the merchant, who is charged lower fees per transaction than individual customers. However, settlement times can range from one to four or more days, which can create challenges for merchants in managing cash flows (such as payments to suppliers, for example).

Open Finance is a new solution for lower transaction fees

Open Finance has the potential to transform Indonesia’s payments infrastructure. While regulation around Open Finance is still emerging, by directly connecting various financial APIs, Open Finance could bypass payment gateways while serving a wider range of payment and payout methods.


As an Open Finance API platform, Finantier’s products and services allow merchants to process payments free of charge by leveraging the intra-bank transfer method but in an easier-to-use interface. Enhanced UX and UI enables merchants to manage their otherwise siloed payment transactions from various banks in one integrated user dashboard, solving a major operational challenge for MSMEs.

New regulations further develop Indonesia’s payments ecosystem

To facilitate the integration of financial APIs, in August 2021, Bank Indonesia (BI) created the National Payment Open API Standard, or SNAP. BI SNAP is defined as a standard set of protocols and instructions that enable interconnectivity between various APIs in processing payments transactions. By implementing a unified standard under SNAP, BI seeks to create a healthy, competitive, and innovative payment system in Indonesia through enabling rapid adoption and penetration of services.

While BI SNAP regulations are still taking shape, BI has taken several steps to reduce friction and barriers for payments in Indonesia. With BI FAST, a new real-time retail payment infrastructure, BI is responding to public demand for fast, easy, and affordable payment systems. For instance, BI FAST sets the maximum transaction fee at Rp. 2,500 (approximately USD 0.20) per transaction - less than half that of RTO.  BI FAST is slated to launch in December 2021 with a first batch of 22 participating financial institutions. 

Consumer behaviour and regulatory pressure create a huge opportunity for Open Finance in Indonesia

With BI’s ambition to revolutionise Indonesia’s financial system by 2025, there is a massive, demonstrated need for Open Finance to build the digital infrastructure required to make these goals a reality. Beyond digital payments, Open Finance - through powering new products such as enhanced credit scoring and e-KYC - has the potential to drive financial inclusion for millions of currently unbanked or underserved Indonesians. 

At Finantier, we are excited to build products that will help realise these goals, and believe in the ability of Open Finance to deliver new and improved financial services to millions of Indonesian customers and MSMEs. 

About Diego Rojas

Diego Rojas is the Co-Founder and CEO of Finantier. He is a software engineer with more than a decade of experience building fintech products across the US, Europe, China, and Southeast Asia. He previously worked closely with LendingClub (US) and Dianrong (China) in the P2P lending space. He was also CTO of several Fintech startups in Southeast Asia.


About Finantier

Finantier is the leading Open Finance platform for Southeast Asia, providing infrastructure and data products for fintech companies and financial institutions to leverage consumers’ financial data from a wide range of sources across the region in order to build the future of financial services. To drive financial inclusion in the region, Finantier strives to make financial services accessible for everyone, especially for the millions of unbanked and underbanked. 

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Keywords: Open Banking, Open Finance, transactions , API, regulation
Categories: Banking & Fintech
Countries: Indonesia
This article is part of category

Banking & Fintech