Indonesia Launching Its Own Credit Card Network

In March 2023, Bank Indonesia announced plans to transition away from foreign credit card networks such as Visa and Mastercard, replacing them with a domestically developed payment network. In doing so, Indonesia is showing that it wants greater control over its credit card space, rather than relying on foreign providers. Other markets – particularly in the Global South – are expected to follow suit.

Based on GlobalData’s Payment Cards Analytics, there were only six credit cards per 100 individuals in Indonesia as of 2022. In terms of number of credit cards in circulation, Visa accounted for 66.8% while Mastercard held a 26.2% share. With a population of over 270 million, Indonesia is a developing economy. The country’s fast-growing middle class means the number of credit cards in the market is set to record a compound annual growth rate of 12.8% over 2022–26. Meanwhile, annual transaction value will rise from $18.9 billion in 2022 to $30.6 billion by 2026. These forecasts help highlight why Indonesia is so keen to break up the Visa-Mastercard duopoly.

Indonesia’s move is part of a broader regional trend, with various countries and territories pushing for greater control over their payment systems. For example, Singapore and Thailand linked their respective instant payment systems in April 2021. Meanwhile, at the 2022 G20 summit in Bali, the central banks of Indonesia, Malaysia, the Philippines, Singapore, and Thailand signed a memorandum of understanding to integrate their payment systems into a regional payment network by 2025. The aim is to reduce the reliance on SWIFT while cutting fees, as settlements will be completed locally without having to be routed overseas. Additionally, transactions that would take a few days to clear via SWIFT will instead be settled almost instantly.

Reducing processing and settlement costs will benefit consumers

The factors driving Indonesia’s plans are similar. A domestic credit card network will reduce processing and settlement costs compared to international schemes. This in turn will reduce fees for both merchants and consumers. The move will also create employment and other opportunities for the domestic economy, which will benefit consumers in Indonesia.

Meanwhile, the situation in Russia – which was removed from the SWIFT payment network (along with Visa and Mastercard leaving the market) due to US sanctions – will have increased the urge to develop an independent payment network for many Global South economies. For countries with large populations like Indonesia, gaining financial independence is a pressing issue to reduce the reliance on Western-based companies and networks.

Indonesia’s move is likely to start a chain reaction among Global South countries. Countries with larger populations will want to set up their own payment networks for various types of transactions if they have the capacity to do so. Among those without the necessary technical capabilities, there will be pacts of smaller countries in each region banding together to organize their own payment networks. In the future, we expect to see a variety of payment networks across countries and regions, rather than markets being driven by the likes of Mastercard and Visa.

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Arnie Cho is senior analyst, APAC Payments, GlobalData