Indonesia Payment System

:: What is the Payment System?

What is the payment system? The payment system covers the legal and regulatory framework, institutions and mechanisms used to transfer funds in order to settle liabilities arising from economic activities. What, then, are the components of the payment system? Needless to say, there must be payment instruments and a clearing mechanism that includes settlement. Of course, other components are involved, such as the institutions participating in the operation of the payment system. These include banks, non-bank financial institutions, non-bank funds transfer providers, switching companies and even the central bank (see Growth).

:: Evolution of Payment Instruments

There has been very rapid and sophisticated advancement in payment instruments. If we look back to the early days of payment instruments, the barter system was a common practice in ancient times. Gradually, people became accustomed to the use of specific units representing a value of payment, more commonly known as money. Now, money is one of the most widely used payment instruments in society. Payment instruments later advanced from cash-based instruments to non-cash payment instruments, such as the paper-based instruments of cheques and bilyet giro (non-negotiable bank clearing payment orders). Following this, payments took a further step forward to the use of paperless instruments, such as electronic funds transfers and card-based instruments (ATM cards, credit cards, debit cards and prepaid cards).

:: Cash Instruments

Cash exists mostly as banknotes and coins. Cash continues to play an important role, especially in small transactions. In today’s modern society, the use of cash such as banknotes and coins is declining in comparison to payments drawing on demand deposit funds. In 2005, cash accounted for 43.3 percent of the total money supply.

However, cash also has disadvantages in regard to efficiency. Inefficiency arises because of the high costs of cash handling, not to mention loss of time when making payments. For example, one can spend a long time queuing to make a payment at a counter. Also, conducting high value transactions in cash runs the risk of theft, robbery and counterfeiting.

In view of the inconvenience and inefficiency of using cash, BI has taken the initiative to promote the building of a less cash society (LCS).

:: Non-Cash Instruments

Non-cash instruments have become well established and are in popular use. This shows us that non-cash payment services provided by banks and non-bank financial institutions (NBFIs), whether for funds transfers, clearing operations or settlement, are available and operating in Indonesia. High value non-cash payments are processed by Bank Indonesia through the BI-RTGS (Real Time Gross Settlement) system and the Clearing System. The BI-RTGS System is the major channel for settlement of financial transactions in Indonesia.

Almost 95 percent of high value and urgent financial transactions, such as on the interbank money market, the stock market, government transactions, foreign currency transactions and clearing settlement, are processed through the BI-RTGS system. In 2005, the daily turnover of transactions handled in the BI-RTGS system reached at least Rp 82.8 trillion. By comparison, only Rp 4.7 trillion was recorded in daily non-cash transactions using card-based instruments provided by banks or NBFIs.

The importance of the BI-RTGS system to the national payment system means that the continuity and stability of the system must be safeguarded at all times. If at any time the BI-RTGS system breaks down or experiences a technical fault, there will inevitably be highly disruptive impact on the operation and stability of the domestic financial system. This does not even include the material and non-material impact of system breakdown. BI therefore pays very close attention to maintaining the stability of the BI-RTGS, which is categorised as a Systemically Important Payment System (SIPS), one that processes high value, urgent payment transactions.

Bank Indonesia therefore has every reason to take great care in safeguarding the stability of the existing SIPS. To do this, it manages the risks, design, technological reliability, supporting networks and the SIPS rules. In addition to the SIPS, there are also System Wide Important Payment Systems (SWIPS), which are systems used by the public. The clearing system and card-based instruments come within the SWIPS category. BI also pays careful attention to the various SWIPS because of their popular use. Whenever a system experiences disruption, the public interest in conducting payments will also suffer, as will confidence in the system and the payment instruments processed within the system.

BI does not only seek to create efficiency in the payment system, but also equitable access and consumer protection. Creation of efficiency in the payment system is intended to provide convenience to users in which they can select a payment method accessible throughout Indonesia at the lowest possible cost. Equitable access means that BI also considers how equity considerations are applied in the operation of the payment system. Lastly, consumer protection means that operators have the obligation to adopt reasonable consumer protection principles in their system operations.

Cash Management Operations

1.	Q: It is often that members of the public come into possession of banknotes that are unfit or even no longer valid as legal tender. What can they do?
	A: If a member of the public receives banknotes that are unfit or no longer valid, these notes should be collected first until a reasonable amount is accumulated, before taking them to Bank Indonesia for exchange with new currency at the same face value.
2.	Q: Why should the unfit or demonetised banknotes be collected first?
	A: That is merely a matter of efficiency. If one has to travel to a BI office to redeem only one banknote of only modest face value that is unfit or no longer valid, that inevitably costs something. Obviously, it is not worth the effort if the cost of exchanging is more than the face value of the rupiah to be redeemed.
3.	Q: For convenience’s sake, isn’t it possible to redeem banknotes that are unfit or no longer valid as legal tender at the nearest bank?
	A: If possible, go straight to BI. True, members of the public can visit a nearby bank to redeem unfit or demonetised banknotes, but then the bank will have to exchange these notes again at BI.
4.	Q: Why is it that rupiah banknotes seem to deteriorate so easily?
	A: In reality, rupiah banknotes would not wear or tear easily if the public would handle the money they receive in the proper manner. As we all know, earning money is hard, so why don't we handle each bit of rupiah we receive as something of value, for example by not folding or crumpling so that the banknote does not become shabby and dull. Let’s take proper care of every piece of the rupiah currency we have worked so hard to earn. If all members of the public would care for and look after the rupiah currency, the banknotes would not deteriorate quickly
5.	Q: What are the criteria for damaged currency that may be redeemed at BI?
	A: If a member of the public receives rupiah damaged to the extent that less than half (≤ 50%) remains intact, for example, only a quarter of a banknote, BI cannot provide a replacement. However, if more than half (≥ 50%) of a damaged note is intact or it still has a serial number, BI will exchange it for a new banknote of equivalent face value.
6.	Q: Now, if a member of the public receives counterfeit money, can that also be exchanged at BI?
	A: Absolutely not. Why? If BI accepts counterfeit money for exchange from the public, that would be tantamount to legalising the crime of counterfeiting. Imagine then if counterfeiters printed as many forged banknotes as they could and then turned them in to BI. This would obviously have a disruptive effect on the economy, particularly in regard to the targeted money supply. The impact of this would be to drive up inflation. For this reason, counterfeit money will not be replaced by BI. Counterfeit money handed in by the public will be passed on to the police for investigation and subsequent action.
7.	Q: Can you explain why BI has made banknotes in designs and colours that are similar? For example, the Rp 100,000 note issued in 2004 and the Rp 10,000 note issued in 2005, when seen at a glance and especially in the dark, appear to share the same design and colour. If not examined closely, one can be mistaken for the other.
	A: True, when seen at a glance, some colours appear similar. However, BI always disseminates information to the public in advance of launching a new banknote or coin. If the Rp 10,000 and Rp 100,000 denominations are examined carefully, the differences in design and colour will become obvious. It should be added that each plan for issuance of a new denomination, no matter what the face value, passes through a long and selective process. (*)

Pay-ins Withdrawals of the Bank

1.	Q: When cash is deposited at Bank Indonesia, how are differences in the cash count resolved?
	A: When cash is counted for deposit at BI and there is a discrepancy in the count, BI usually asks the bank to perform a joint count. At least four factors are involved when a discrepancy arises. For example, the number of banknotes or coins could be less or more. Discrepancies can also arise because of inclusion of a different denomination or from damaged banknotes or coins that cannot be redeemed and discovery of counterfeit money.
2.	Q: If a bank never deposits cash at BI, can the column for that bank’s cash deposits be left blank?
	A: Of course.
3.	Q: BI recently conducted a trial run of its new cash deposit system. In the future, will there still be a division into BI operating areas? And will banks be able to handle cash management for other regions under the proposed plan for cash centres?
	A: This will still be possible if a bank serves other branch offices in other areas.
4.	Q: Will the establishment of Focus Groups (FGs) be driven by BI or will the FGs be established by the banks themselves?
	A: There are several underlying considerations in the establishment of the FGs. However, the main factor is the character of the individual banks in the local area.
5.	Q: In regard to cash clearing, will the costs be borne by the FGs? And what about the delivery mechanism and requests for physical checks, such as for counterfeit money or discrepancies in the cash count?
	A: Clearing charges will be specified in the By-Laws, as required by law. Nevertheless, the charges can also be determined under a joint arrangement by the banks involved. The draft By-Laws state that cash will pass through an overall check before proceeding with detailed examination. After the count is completed, an official record will be drawn up of the transfer, including any issues of discrepancy.
6.	Q: If a bank has a long position and offers cash to members in the FG but no member expresses interest, what should happen next?
	A: If no member in the FG is interested, the offer can be passed on to members of other FGs, as cash transactions among different FGs are supported. However, if no other bank takes up the offer, BI may accept the cash deposit under certain conditions, such as during major holiday periods.
7.	Q: If an FG member bank is suddenly hit by large-scale cash withdrawals and other FG members are short, what should be done?
	A: If a bank has a long or a short position, this information should be circulated and deliberated within the FG. However, if this fails to provide a solution, it is possible to exchange with another FG. This necessitates coordination from the FG coordinator. If the bank’s needs are still not met, only then should it contact the nearest BI office.
8.	Q: What happens when a bank frequently accumulates a long position? What action will BI take?
	A: If a bank does consistently record a long position, BI will examine the nature of bank cash positions within each area. The information thus gathered will form the basis for establishing an FG. If any bank does run up an overall long position, it could provide a cash holding function and in the long term be encouraged to establish itself as a cash centre.
9.	Q: When cash unfit for circulation is discovered upon collection from another FG member, can it be returned?
	A: That cash should preferably be accepted. In any event, it can later be deposited at BI.
10.	Q: If there is any failure to deliver on commitments or event of default, how will this be resolved?
	A: This will be specified in the By-Laws. In principle, sanctions must apply to any irregularity or violation, but what form these sanctions will take is still under deliberation. (*)

Counterfeited Money

1.	Q: Can you explain how one can tell that rupiah banknotes are genuine?
	A: It’s easy and simple. Members of the public can distinguish the security features of the rupiah just as explained in the public service ads broadcast by Bank Indonesia on television and published in the print media. These ads are designed around the 3-D jingle, i.e., Dilihat (See), Diraba (Feel) and Diterawang (Hold up to the light). See means that any cash one receives should be inspected to see whether it is counterfeit or genuine. If the authenticity is still in doubt after a visual check, try feeling for texture. Genuine banknotes will feel different to counterfeit ones. What is the difference? When gently rubbed, the paper can be distinguished by quality. The banknote surface will have a slightly rough texture. Then, when held up to the light, genuine notes will display security features: a watermark and a security thread or ribbon.If further assurance is needed to distinguish genuine from counterfeit, the note can be examined using a simple device such as an ultraviolet (UV) light. A note illuminated with UV will very clearly show up the security features, such as a glowing image and serial numbers. These are not found perfectly on counterfeited notes. Alternatively, one can use a magnifying glass or loupe, which will also help in clearly identifying the security features on genuine notes.
2.	Q: Is it true that each genuine rupiah note has a number of security features?
	A: First, it should be understood that not all rupiah banknotes have the same number of security features. The larger the denomination, the more security features are used. Nevertheless, the security features incorporated into each denomination are generally similar. Only the design is different.
3.	Q: Where do we find the security features on genuine rupiah banknotes and what are the designs like?
	A: One way of distinguishing genuine rupiah currency is by the material used. That means that anyone can immediately tell the difference between the material used to make genuine rupiah banknotes, which feels different to counterfeited notes. The banknote paper is a special kind, not like the paper widely available to the public. Members of the public can also discern by quality of printing. Genuine rupiah banknotes are printed to a visibly excellent quality standard. On the other hand, counterfeit money can be easily distinguished by printing quality, with notes sometimes having a dull, inferior appearance. In essence, counterfeit money is marked by poor quality printing. Other security features providing a standard for the public are the design and dimensions of banknotes. At a glance, counterfeited notes do look similar in quality of design. However, if examined closely, important differences will appear. The design quality in counterfeited notes is very low. Likewise, physical dimensions are frequently not the same as for genuine rupiah banknotes
4.	Q: If one discovers rupiah currency of doubtful authenticity, what should be done?
	A: If any member of the public comes into possession of rupiah currency seriously doubted for its authenticity, despite having used the simple 3-D process, confirmation can be obtained by visiting the nearest commercial bank or a Bank Indonesia representative office, which can be found in many urban centres. How? It is easy. Upon arriving at a BI office, just fill in a form for clarification of rupiah authenticity, attaching the rupiah banknotes of doubtful authenticity as evidence. BI will respond within 14 working days after receiving the clarification form.
5.	Q: Will BI provide refund for counterfeit money discovered by the public?
	A: BI will not provide any refund for counterfeit money. Accordingly, BI constantly appeals to the public to understand properly how to distinguish authentic rupiah currency in order not to suffer losses. Any counterfeit notes taken to BI will be handed over to the police for further action. Counterfeiting is categorised as a very serious crime because of its potential to threaten a nation’s economic stability.
6.	Q: What steps does BI take to combat counterfeiting and to keep counterfeit money out of circulation?
	A: To combat counterfeiting, BI takes a two-fold approach. The first approach is preventive. For example, BI disseminates information on security features through direct contact with the public in its public education programme on authenticity of the rupiah. BI is also active in communicating messages and information through public service advertising in national and local print media and electronic media, such as on television stations. Second are law enforcement actions against counterfeiters, including networks circulating counterfeit money. BI cooperates with other law enforcement agencies such as the police, the Anti-Counterfeiting Coordination Agency (Botasupal) and the attorney-general’s office. Needless to say, active cooperation from the public will be of great value to BI and law enforcement agencies in their efforts to combat counterfeiting crimes. (*)

Card-Based Payment Instrument

1.	Q: Can you explain the underlying reasoning in Bank Indonesia’s decision to raise the credit card repayment minimum to 10% of the total balance outstanding? Speaking frankly, the new rule puts an extra financial burden on credit cardholders.
	A: At BI, we considered the issue at great length before issuing the ruling. One fundamental reason for raising the minimum payment was precisely to protect consumers from falling into a debt trap. Of course, you will respond with another question: why would that be? Doesn’t it create an added burden? Credit cardholders need to understand properly that the prevailing interest rates on card purchases for goods are now in the range of 2.25%-3.5% per month. For cash advances, even higher rates are charged at 2.7%-6% per month. If credit card interest is calculated for a full year, the rates vary from 28.8%-42% for goods purchases. For cash advances, the annual rates are as high as 33%-72%. Added to this, cash advances are charged high administration fees. Now, try to compare this with rates on time deposit rates, currently in the range of 7%-9%. The size of the spread is painfully obvious.Imagine if you paid a minimum of only 3% of the outstanding balance every month. As the months go by, the interest on the card balance would quickly soar. Why is this? The remaining balance would be subject to very high interest charges, and the concern is that you would no longer be able to pay your credit card bills. This is the background to why BI adopted a policy of raising the minimum card repayment to 10%.
2.	Q: I see. Could you explain which parties are actually involved in credit card transactions?
	A: There are several parties that become involved in a transaction made by credit card. Obviously, there is you, the credit cardholder. When the credit card is used, there is a merchant, such as a supermarket, hospital, hotel, restaurant, bookshop or other seller, that will process your card transaction. Then there is the credit card issuer, for example, a bank or non-bank financial institution. Indonesia now has 20 credit card issuers, of which 18 are banks and 2 are non-bank financial institutions. Now in addition to the three parties normally known to the public, there is another party involved in the credit card transaction. This is the Financial Acquirer (FA). The FA is the party that advances payment on the transaction conducted by the credit cardholder. Together with the merchant, the FA is responsible for checking the validity of sales drafts. The FA also provides authorisation terminals, receives and processes each transaction and provides training and supervision for merchants. In addition, there is yet another party known as the Technical Acquirer, who provides the equipment for processing transactions (authorisation terminals). Finally, there is the principal, well known to the public. The principal is a bank or non-bank financial institution with sole rights to a credit card brand name, such as Visa, MasterCard, JCB, Diners, American Express, BCA Card and others.
3.	Q: Could you explain again the difference between a principal and credit card issuer?
	A: The principal is a bank or non-bank financial institution with exclusive rights to a brand for card-based payment activities. Principals are divided into two categories. General principals hold brand rights that may be used by the Principal itself or by other card issuers. Examples of this are Visa and MasterCard. Use of the brand is not only available to the Visa and MasterCard principals, but also other issuers of Visa and MasterCard products, such as banks. In addition to General Principals, there are Special Principals, whose brand rights may only be used by the Principals themselves and cannot be shared with other issuers. In this case, the Principal acts both as Issuer and/or Acquirer.
4.	Q: In view of the many different parties involved in processing what appears to be a simple credit card transaction, there must be many different types of equipment involved. Could you explain what equipment is used?
	A: When you use your credit card, a sales draft will be issued stating the card number, name of cardholder, card validity, name of merchant, amount of transaction and authorisation code and bearing your signature. It is important to check the sales draft carefully for the number of items purchased and purchase amount. The sales draft should not be immediately discarded, but retained as evidence in case of any difference between the credit card billing statement and the amount you spent. One device commonly used is electronic data capture (EDC). When a merchant sweeps a card through this machine, it will read the card information and then receive an authorisation code before issuing the sales draft. To print the obverse side of the credit card on the sales draft, an imprinter is also needed, but with advancements in EDC devices, imprinters are now rarely used. Sweeping the card will generate a point-of-sales transaction in which the machine receives an authorisation code that appears on a computer screen.

Clearing

1.	Q: Not long ago, there were widespread reports in the media of a massive clearing deficit at a national bank. What is actually meant by a clearing deficit?
	A: A clearing deficit is a position in which a clearing member bank sustains a debit balance, with payment liabilities greater at the end of a clearing cycle in excess of claims.
2.	Q: If I am not mistaken, BI is introducing what is called the National Clearing System. Could you explain what the system is, and what goal is to be achieved?
	A: The Bank Indonesia National Clearing System (SKNBI) is a clearing system encompassing debit clearing and credit clearing with settlement conducted for all banks nationwide. The goal is to improve the efficiency of the payment system in Indonesia. It also aims to achieve compliance with risk management principles in clearing operations.
3.	Q: With the introduction of the SKNBI, can funds transfers take place in real time?
	A: The answer is no. True, the SKNBI has integrated the operation of funds transfers (debit clearing) into a nationwide, online system. However, settlement cannot take place in real time. The integration will improve efficiency as a result of shorter processing time due to the use of paperless credit transfers (paper instruments no longer used). Furthermore, because most banks are connected online to the clearing operator, it follows automatically that transaction data can be sent and clearing results downloaded online. This will save time in comparison to the earlier system. At this time, Indonesia has a total of 105 local clearing operators comprising units managed directly by BI and third parties appointed by BI.
4.	Q: What then is the difference between the clearing system and BI-Real Time Gross Settlement (RTGS) in which settlement takes place in real time?
	A: In the clearing system, settlement of funds transfers must await the outcome of the netting process conducted by the operator, in this case BI. With the SKNBI in operation, netting can be conducted per cycle, for example at midday (end of first cycle) and then in late afternoon (end of second cycle). In contrast, the BI-RTGS system enables settlement in real time, because settlement takes place on a gross or per transaction basis during the RTGS operating hours. With netting twice daily, funds transfers processed in clearing can be completed on the same day as long as book entry is performed immediately at the bank after BI, the operator, has completed the processing of clearing results. Of course, the transaction data must be free of technical errors that would prevent processing by the operator. As a matter of information, the SKN design supports faster settlement of funds transfers. In the rules established by BI as operator, the beneficiary bank is required to credit funds immediately to the customer account on the same date as clearing settlement, or no later than 09:00 hours local time in Jakarta on the following day. Delay by the beneficiary bank is liable to payment of compensation in the amount of interest calculated from the settlement date. Funds transfers through the SKN will therefore take no more than one day after the transaction date, provided that the office of the beneficiary bank is also linked to the SKN. BI’s target is to achieve nationwide integration of the SKN in 2007.

RTGS

1.	Q: Interbank funds transfers can now be processed quickly. Can you explain how this happens? In the past, funds transfers between banks could take several days.
	A: This is clearly made possible by modern progress and advanced technology. BI now employs what is called the BI-Real Time Gross Settlement (RTGS) system for processing interbank funds transfers. The RTGS system is a settlement process in which payments are individually processed (gross settlement) in an electronic system in real time.
2.	Q: Can you explain what is meant by real time? How much time is needed for settlement of funds transfers through the BI-RTGS system?
	A: The BI-RTGS system does indeed support the settlement of individual transactions (gross settlement) in real time. Nevertheless, the meaning of real time must be understood from the bank perspective. Why? This is because the time taken for completion of transactions ultimately depends on the technology employed by the individual bank. If a bank uses an online system linked to all branch offices, the time needed will obviously not be long. However, if the bank does not have online facilities, time will be needed for manual book entry processing before funds are made available to customers. In this case, transactions will clearly require longer time.
3.	Q: Why does gross settlement apply to transactions on the BI-RTGS? What is the difference with net settlement?
	A: The gross settlement system is indeed different from the net settlement system used in clearing. In a clearing system, settlement takes place in a process called offsetting. That means that claims are subtracted by the bank’s liabilities to other clearing banks to obtain a net position at the end of the clearing period. The clearing mechanism takes a longer time to process funds transfers compared to the BI-RTGS system.
4.	Q: If almost all banks are BI-RTGS members, why do funds transfer charges vary from bank to bank?
	A: It should first be clarified that banks transferring funds on the BI-RTGS system are charged Rp 7,000 per transaction from 07:00 to 15:00 hours local time in Jakarta. From 15:00 to 17:00 hours, during what is customarily referred to as the cut-off period, the BI-RTGS system charges Rp 15,000 per transaction. In regard how banks calculate their charges for funds transfers, this is left entirely to the discretion of the individual bank. The calculation of these charges also depends on operating costs, investment and other costs related to the use of the RTGS system. Banks can therefore be expected to set varying levels of transfer charges.
5.	Q: Can you explain the funds transfer mechanism used in the BI-RTGS system?
	A: Because the question is about the mechanism, the answer is somewhat technical but not too complicated. From a high-level perspective, the system can be explained as follows. Each BI-RTGS member bank will input funds transfer orders into the RTGS terminals installed at member banks. These orders will then be forwarded to the RCC, or RTGS Central Computer, the heart of the processing system at BI. The RCC will then initiate processing and check the account balance of the bank sending the funds transfer order. If the account of the sending bank at BI has sufficient balance, i.e. is equal to or greater than the amount of the funds to be transferred, the RCC will execute the funds transfer by simultaneous posting to the accounts of the sending bank and the receiving bank. However, if the sending bank has insufficient account balance, the credit transfer order will be placed in the queue in the RTGS system. As explained, the RCC will continually check the account of the sending bank for sufficient balance to process the funds transfer. If there is sufficient balance, the funds transfer will proceed immediately.
6.	Q: But isn't there any facility or mechanism for a BI-RTGS member bank with insufficient balance to complete a transaction?
	A: There is. To cover this, the central bank provides the Intraday Liquidity Facility (FLI). This facility enables RTGS member banks with insufficient balance to keep processing transactions in order to maintain the smooth flow of payments among members. Of course, to use the BI-RTGS system, each member is required to maintain a high level of liquidity throughout the day.
7.	Q: How much is permitted to be transferred through the BI-RTGS mechanism?
	A: There is no limit on the amount of a transfer. Any amount can be transferred through the BI-RTGS system. It is true that certain times, such as in advance of religious festivities or official holidays, are marked by a massive surge in transaction activity. To keep the system working smoothly during periods of soaring transaction activity, BI has been compelled to impose restrictions on RTGS transactions above Rp 25 million.
8.	Q: If so, then it is important to maintain the smooth flow of transactions through the BI-RTGS system. But the risk of system failure is a real possibility. Can you explain what BI has done to anticipate this eventuality?
	A: Of course, the transactions processed through the BI-RTGS system account for 95 percent of turnover in the domestic payment system. There is reason to be concerned about critical impact from BI-RTGS system failure. Even only a minor breakdown could affect financial system stability as a whole. For this reason, BI has given enormous attention to the security and reliability of the system. To ensure the security and reliability of the BI-RTGS system, a series of tests was performed at each stage of development and system enhancement, for example, when developing encryption or the highly complex codes that could affect the networks to be used. BI also asked PT Telkom to conclude a service level agreement related to the provision of the network infrastructure used to support RTGS transactions. Moreover, there are regular performance upgrades for each computer used by BI, the system operator, and RTGS member banks. Each operational officer in charge of the system is registered and issued a password according to his or her powers and responsibilities. The BI-RTGS system is also provided with a backup system to cover the event of possible breakdown in the main system. The backup system is tested with all members each year to ensure that members are better prepared for possible emergencies in the main system.

General Information

1.	Q: Why does each country need a payment system?
	A: If a country didn’t have a payment system, funds transfers would not move. Even if they did, settlement would pose numerous obstacles and complications. Why is this? If the existing system were not used, what mechanism for settlement of funds transfers would be used? Without a system, the flow of funds would undoubtedly grind to a standstill, bringing down the nation's economy.
2.	Q: What then is the payment system?
	A: The payment system is a set of components that collectively represent an integral whole necessary to enable transfer of monetary value from one party to another party. These parties may be individuals, companies or banks. The components normally found in a payment system are payment instruments, operating institutions, infrastructure, agreements among stakeholders, rules, operating mechanisms and the legal framework.
3.	Q: Could you explain what is meant by payment instrument?
	A: There are several different types of payment instruments in common use, consisting of cash (such as banknotes and coins) and non-cash instruments (cheques, giros and drafts, debit cards, e-money and so on). These payment instruments are vital to the operation of a payment system.
4.	Q: What are cheques?
	A: A cheque is an instrument for payment of cash that requires availability of funds on demand, particularly when presented or cashed by the bearer. The period for presentation (encashment) of cheques is 70 days after date of issue. If this period expires, the cheque becomes void, meaning that it cannot be cashed. A cheque is a special kind of draft and must be issued by a bank. It differs from the kind of draft commonly known to the public, comprising the money order for transfer of funds through the post office. This does not need to be issued by a bank.
5.	Q: When BI issues or prints new currency, why are there sometimes apparent similarities in the designs or colours with other currency? For example, the Rp 100,000 note issued in 2004 appears similar to the Rp 10,000 note issued in 2005.
	A: At a glance, the two banknotes do appear similar, particularly in regard to colour. However, when examined more carefully for both design and colour, there are obvious differences. BI always informs the public of each issue of new currency, including any apparent similarities in colour or design between two different banknotes or coins.
6.	Q: Each time BI issues currency, security features are always included. How many security features can be found in each issue?
	A: The number of security features for each denomination is not always the same. The larger the denomination, the more security features are used. As a rule, the same types of security features are used for all rupiah denominations, but the designs are different.
7.	Q: Where can the security features normally be found, and what features are incorporated in rupiah currency?
	A: General information on security features for rupiah currency can be found under the titles of currency material, printing and minting techniques, design and dimensions.
8.	Q: What is meant by damaged currency? What are the criteria for damaged currency to be redeemed at BI?
	A: Damaged currency is currency that has sustained physical damage. If more than half (≥ 50%) of a damaged banknote remains intact, it can be redeemed at face value if it still bears at least 1 (one) serial number. However, if less than half (<>
9.	Q: What should be done if a member of the public comes into possession of banknotes that are worn, torn or no longer valid as legal tender?
	A: If a member of the public has received banknotes that are worn, torn or no longer valid as legal tender, these banknotes may be redeemed at Bank Indonesia. (*)