Bank Indonesia (BI) has announced that it is finalizing an agreement with South Korea and India to use local currency settlement (LCS) for cross-border payments, including trade and investment transactions. The use of LCS will allow Indonesia and its partner countries to directly use their respective currencies, rather than relying on the US dollar.
In the near future, Bank Indonesia will collaborate with the monetary authorities of South Korea and India, including in cross-border payments. Cross-border payments enable payers and receivers to be in different countries, making transactions easier for tourists who no longer need to exchange physical currency to local currency.
Indonesia’s trade transactions with Thailand using LCS have reached USD 600 million or 3% of the total trade value. The largest trade transactions that Indonesia conducted without using the US dollar were with China and Japan, which have reached almost USD 2 billion.
The use of LCS is expected to increase the value of Indonesia’s trade transactions with other countries. Bank Indonesia hopes that LCS can strengthen and accelerate economic relations with Indonesia’s trade partners. In addition, using local currencies will reduce exchange rate risks and transaction costs. Therefore, LCS is one way to strengthen Indonesia’s economic relations with its trade partner countries and increase investor confidence in investing in Indonesia.
To optimize cross-border payment between countries, a highly efficient system is required to ensure smooth processing. Cranium Indonesia, a part of BC Card Asia Pacific, has been given the opportunity to develop software to support cross-border transactions since 2022 and continues to improve until it is ready to be used in various countries that cooperate with Indonesia for cross-border payment. Being a part of BC Card allows Cranium Indonesia to contribute to the advancement of Indonesia’s economy in the field of technology capabilities.
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