Workforce Payments Guide Indonesia
Last updated: Dec 27, 2023
Papaya Global fully supports workforce payments in Indonesia.
Papaya Global supports payments to contractors in Indonesia. The payout currency may vary based on the receiver bank account setup when receiving foreign currencies. Contractors are advised to reach out to their bank to confirm how foreign currencies are handled.
The KYC (Know Your Customer) process in Indonesia is mandatory by Bank Indonesia and is regulated through BI Regulation No.3/10/PBI/2001 regarding the application of Know Your Customer principles and Law No. 8 of 2010 concerning prevention and eradication of money laundering.
The KYC process is designed to prevent fraud or money laundering. It involves identifying the customer’s identity and monitoring customer transaction activities, including reporting suspicious transactions. Companies must implement strong security measures to protect customer data and also have policies in place to ensure that the data is only accessed by authorized personnel.
Compliance with the KYC process is heavily regulated to ensure that financial institutions are not used for illegal activities such as money laundering or financing terrorism.
In recent times, the KYC process has evolved to become the E-KYC or electronic Know-Your-Customer process. This digital onboarding experience primarily focuses on acquiring or registering new users and is designed to detect potential risks that conventional KYC methods may overlook.
E-KYC involves the customer initiating the process, capturing and verifying biometric data, and upon approval, issuing a digital identity document. The eKYC process can include methods such as video calls, sending facial photos, utilizing population data through electronic ID cards, and using digital signatures.
Companies must comply with various regulations such as KYC and Anti-Money Laundering (AML) laws. Advanced facial recognition and biometric authentication technologies are used to provide a seamless and secure eKYC process.
However, the implementation of eKYC in Indonesia faces several challenges, including privacy and security concerns, interoperability and standardization issues, accessibility and affordability, and the digital divide.
The banking laws in Indonesia that impact cross-border workforce payments are primarily centered around the regulations issued by Bank Indonesia (BI), the country’s central bank. Here are some key points:
BI Regulation No. 23/11/PBI/2021: This regulation, also known as the National Standard Regulation, was issued with the objective of creating a safe, reliable, innovative, and integrated national payment system. It includes various regulations on BI authority, setting up a benchmark for the implementation of the Indonesian payment system, and strengthening the policy and application of standards.
BI Regulation No. 22/23/PBI/2020: This regulation aims to structure the regulatory framework of the country’s payment systems. It was issued as part of a restructuring of the regulatory framework of payment systems, including the reclassification of the activities of payment service operators.
National Standard for Open Application Programming Interface Payments (SNAP): The implementation of SNAP covers interconnection and interoperability, information system safety standard, governance, and risk management of Open API payment.
These regulations have a significant impact on cross-border workforce payments as they govern the standards and procedures for payment systems, including those involving foreign transactions.
Opening a Bank Account
To open a company bank account in Indonesia, the following requirements must be met:
- An initial deposit of IDR 1 million
- A minimum balance of IDR 10 million at the end of the month
- Retained balance of IDR 10,000
- A copy of the Indonesian identification card or passport for Indonesian citizens
- A copy of the passport or KITAS (stay permit) of foreign individuals
- A copy of the business permit and proof of identity of business owners for individual businesses
- A copy of the tax identification number (NPWP), deed of establishment, and articles of association for non-individual businesses
- Monthly account administration fee of IDR 11,500
- Business license
- Domicile letter
Additional documents required for foreign-owned companies include:
- Completed and signed application form
- Relevant supporting documents
- Tax registration number
- Certificate of incorporation
- Business Identification Number
- OSS Business License
- Copy of tax identification number (NPWP) and tax certificate (SKT)
- Copy of the domicile letter from the building management or tenancy agreement
- Copy of the Deed of Establishment (AKTA)
- Copy of Business Registration Number (NIB)
- Copy of the identification cards of all directors, shareholders, commissioners, and authorized signers
- Copy of Business License (Izin Usaha)
- Copy of Approval of AKTA from the Indonesian Ministry of Law and Human Rights (SK Kehakiman)
- Letter of attorney from the shareholders, boards of directors, commissioners, and authorized signers.
The process of opening a corporate bank account can take from one day to five weeks, depending on the bank and the quality of the documents presented.
The major foreign banks operating in Indonesia include:
- Standard Chartered Bank
- Bangkok Bank
- MUFG Bank
Standard Chartered Bank is headquartered in the UK but makes most of its profits in Asian markets. It sold a 90% stake in another major bank, Bank Permata, to Thailand’s Bangkok Bank, which had been operating on a small scale in Indonesia since 1972.
MUFG Bank, the biggest Japanese bank, in 2019 gained a controlling stake in Bank Danamon and merged it with another MUFG-owned lender in Indonesia. Other major foreign banks operating in the country are HSBC (Hongkong and Shanghai Banking Corporation), Bank DBS Indonesia, and Citibank.
Major Local Banks
Major local banks operating in Indonesia are:
- Bank Indonesia
- Bank Mandiri
- Bank Negara Indonesia
- Bank Ekspor Indonesia
- Bank Rakyat Indonesia
- Bank Tabungan Negara
- Bank Agro Niaga
- Bank Artha Graha Internasional
- Bank Bumiputera Indonesia
- Bank Capital Indonesia
- Bank Central Asia (BCA)
- Bank CIMB Niaga
- Bank UOB Buana
- Bank Bukopin
- Bank Danamon Indonesia
- Bank Eksekutif International
- Bank Kesawan
- Bank Bumi Arta
- Bank International Indonesia
- Bank OCBC NISP
- Bank Permata
- Bank Victoria International
- Bank Mayapada
- Bank Mega
- Bank Multicor
- Bank Mutiara
- Bank Pan Indonesia
- Bank Sinarmas
- Bank Himpunan Saudara 1906
- Bank Perkreditan Rakyat (BPRs)
- Panin Bank
The B2C payment tools available in Indonesia include:
- Visa and Mastercard debit and credit cards
- BNPLs like Kredivo
- QRIS-based payments like GoPay, OVO, and ShopeePay
- Direct debit with BRI and CIMB Niaga
- Bank transfers and virtual account numbers
- E-wallets like OVO, GoPay, DANA, and Doku
- Over-the-counter payments through minimarkets like Alfamart or Indomaret
In Indonesia, it is not permissible to pay employees with cryptocurrencies. According to Law Number 7 of 2011 concerning currency, the only recognized payment instrument in Indonesia is the rupiah.
The use of any other form of currency, including cryptocurrencies, in payment transactions is prohibited and may result in criminal sanctions, such as a maximum imprisonment of 1 year and a maximum fine of Rp. 200,000,000.00. This is also consistent with the Art. 34 of Bank of Indonesia Regulation No. 18/40/PBI/2016 on the Implementation of Payment Transaction Processing, which prohibits payment system service providers from processing any transactions using any form of digital currencies.
Although the purchase and selling of cryptocurrencies in Indonesia are authorized for investment reasons or for legally specified crypto assets, as per the Ministry of Trade Regulation No. 99 of 2018 and Bappebti Regulation No. 7/2020, cryptocurrencies cannot be used as a form of payment.