Indonesia to pull the plug on Visa and Mastercard, president calls them a 'problem'

The Bank of Indonesia is getting ready to transition away from Visa and Mastercard while developing its indigenous payment platform, as reported by the Antara news agency on Monday. 

Joko Widodo, the president of Indonesia, pushed local agencies and authorities last week to switch from using international payment systems to employing cards that are authorised by local banks. 

He made the case that Indonesia needs to protect itself against geopolitical and international upheavals by mentioning the financial sector sanctions imposed on Russia by the US, EU, and their allies over Moscow's war against Ukraine, as reported by RT. 

'Be very careful,' says Indonesian President Joko Widodo

The Indonesian president said: “Be very careful. We must remember the sanctions imposed by the US on Russia. Visa and Mastercard could be a problem,” RT reported.

Erwin Haryono, the spokesman for the central bank, discussed the project and stated that the regulator was in contact with regional companies “and the progress is about 90%," adding that domestic cards will offer several benefits, such as lower costs.

He further said that “offshore settlements and dependence on foreign payment networks such as US Visa or Mastercard will no longer be necessary", as reported by RT. 

Jakarta to learn from Washington's sanctions against Moscow 

Dodit Proboyakti, a board member of the Indonesian Credit Cards Association (AKKI), told RIA Novosti that Jakarta would use the knowledge gained from Russia's Mir payment service to advance the country's domestic economic and financial network.

According to Steve Marta, executive director of AKKI, Indonesia's interbank system, GPN, needs significant modifications to fully accommodate credit cards and foreign transactions. GPN now only allows local debit cards.

Soon after the US initially imposed sanctions on the nation in 2014, Moscow launched its very own national card system, Mir, and developed the domestic National Payment Card System (NSPK) to seamlessly take over all Visa and Mastercard transactions should the US-based corporations decide to stop operating, as reported by RT. 

U.S. dollar to lose dominance due to Russian sanctions: IMF

Last year, Gita Gopinath, the IMF's first deputy managing director, said that sanctions imposed by the U.S. and other western nations against Moscow might destabilise the world's financial system and undermine the dominance of the US dollar.

Gopinath thinks that the severe restrictions imposed by Western nations in response to Russia's special operation in Ukraine may result in the development of small currency blocs based on trade between particular groups of states.

Speaking to the Financial Times, Gopinath said: "We are already seeing that with some countries renegotiating the currency in which they get paid for trade." 

She later added: "The dollar would remain the major global currency even in that landscape, but fragmentation at a smaller level is certainly quite possible."

The US and its allies have placed tough and severe sanctions on Russia

The Russian central bank has been subject to limitations, and export restrictions, selective banks have been cut off from SWIFT (an international payment gateway system), and all Russian flights have been using from using European or U.S. airspace. Many of their businesses have stopped doing business in Russia.

The US, the UK, and the EU have so far imposed sanctions on more than 1,000 Russian persons and companies.