How do you handle currency conversion in payments for Indonesian users?

Introduction: Overview of the Payments Environment in the Indonesian Market

As one of the largest economies in Southeast Asia, Indonesia has a population of 270 million and a rapidly growing e-commerce market. However, the currency conversion issue is often a major obstacle to cross-border transactions when processing payment requests from Indonesian users. In this paper, we will delve into how to effectively address this issue to improve user experience and reduce transaction costs.

I. Understanding the characteristics of Indonesia's monetary system

1.1 Specificity of the Indonesian Rupiah (IDR)

The Indonesian Rupiah ("IDR", code IDR) is one of the lower-value currencies in Southeast Asia. It is characterised by its large denomination, relatively frequent exchange rate fluctuations, and the number of decimal places (usually displayed to two decimal places). This characteristic makes it necessary to pay special attention to accuracy issues when processing in the system.

1.2 Limitations on the redemption of IDRs

According to Bank Indonesia, IDR is a partially convertible currency. This means:

• IDRs have limited liquidity in international foreign exchange markets
• Exchange limits exist in some cases
• Cross-border transfers may be subject to additional regulatory scrutiny

Understanding these characteristics is critical to designing a payment process.

II. Common currency conversion challenges and solutions

2.1 DCC Dynamic Currency Conversion Trap

Many international card organisations offer DCC (Dynamic Currency Conversion), which allows cardholders to choose to settle in their home currency instead of the merchant's pricing currency. This may seem convenient, but it actually hides high fees:

Solution:

• explicit reminder: Clearly labelled "DCC may result in additional charges" on the checkout page.
• default setting: Prioritise settlement in local currency (IDR)
• Real-time comparison: Shows a comparison of the final amounts of the two options

2.2 The problem of "hidden" exchange rate mark-ups

Some payment gateways add an opaque mark-up to the base exchange rate as a source of revenue.

Coping strategies:

graph TD.

    A[raw amount] --> B{whether to display transparently};

    B --> |Yes| C[User trust ↑];

    B --> |No| D [Complaint Risk↑].

The following practices are recommended:

1. Open base rate source(e.g. central bank median price)
2. Explicit fee structure(Fixed fee + percentage)
3. Provide historical exchange rate enquiry

2.3 Differences between VAT and local tax calculations

Currency conversions produce different results when the price of goods is inclusive or exclusive of taxes:

Sample Scenario:

Price before tax:$100 → (at 1:14000) = 1,400,000IDR → +11%VAT = 1,554,000IDR 

Price including tax: 111 USD → (at the same exchange rate) = 1554000 IDR 



However, there may be a difference between the two when the exchange rate fluctuates!

Best practice is to show the localised price including tax right on the product page rather than converting it afterwards.

III. Optimisation options at the technical implementation level

3.1 API Integration Considerations
Interfacing with local financial institutions should ensure that the following features are supported.

• amountFields are large enough to accommodate large numbers (to avoid 32-bit integer overflow)
• currencyParameters strictly follow the ISO 4217 standard ("IDR")
• The response contains the fullexchange_raterespond in singingfx_fee

Example of recommended JSON format.

{

 "transaction_id": "TXN12345",

 "base_currency": "USD",

 "target_currency": "IDR", 

 "exchange_rate":14450.

 "fee_percentage":0,8.

...

}

3, front-end interface design points
The following improvements have been identified through A/B testing to improve 15% conversion rates.

✔️ displays the amount as "Rp14,450 x 100" (instead of "1445000") to enhance readability.
✔️ embeds a miniature calculator icon next to the input box (click to expand the detailed conversion process)
✔️ Tooltip on mouse hover explains why cargo turn is needed

IV. Compliance and risk management framework

4.| - Central Bank Filing Requirements - |
Each transaction involving foreign currency must contain.
- BNI Clearing Code (BankIndonesia-specific identifier)
- HSCODE customs classification number (for physical goods)

4... Special measures against fraud
Due to the vulnerability of large numbers to tampering it is recommended that.
→ Implementation of a dual signature verification mechanism
→ Setting of threshold monitoring for per transaction/accumulated daily limit

V. Future trends and directions for innovation

5./Real-time blockchain settlement experiment/
BCA Bank has begun testing a Hyperledger-based second-by-second cross-border clearing network that could revolutionise the traditional SWIFT model...

6.AI predictive modelling applications
Through machine learning analysis of the past 12 months of data found that Thursday afternoon GMT +7 hours LQ45 index constituent companies employees exchange demand usually surge 23%, accordingly dynamic adjustment of liquidity reserves.

Summary table of conclusions:

Lastly, it is important to regularly review the credentials of third party service providers, especially those holding a PJPAB licence (Penyelenggara Jasa Pembayaran Anak Bangsa), to ensure that they are in compliance with the latest version of the POJK77 regulations.

Optimisation Strategies for Payment Currency Conversion in Indonesia (continued)

VI. Localised Payment Method Integration Strategy

6.1 Mainstream local e-wallet interfacing

There are multiple dominant e-wallets in the Indonesian market and special care is required when dealing with these channels:

Comparison of the technical characteristics of the main platforms:

Implementation of recommendations:

• dynamic routing: Automatic allocation of trading flows based on real-time system performance
• Balance check front: Check e-wallet balance before user confirms payment
• Failed transfer mechanism: Intelligently recommend alternate channels when the preferred method fails

6.2 Bank Transfer Optimisation

Indonesian users are accustomed to using Virtual Account to make large payments:

sequenceDiagram

    Merchant System->>+Bank API:Generate VA Request(Amount+Expiry Time)

    Bank API -->>- Merchant System:Return VA number (e.g. 88888012345678)

    User->>+Internet Banking APP:Enter the specified VA number to make payment

    Internet Banking APP->>-Clearing System:Mark Transaction Status(Pending/Success/Failed)

    loop state polling

        Merchant System->>Clearing System:Update order status every 30 seconds of enquiry result 

    end

    

Key Improvement Points:

1. Short Code Service (SCS): Apply for 8-digit VIP VA number to enhance user experience memory
2. Automated reconciliation tool development: Solve the problem of "paid but not arrived" due to time difference.
3. Multilingual receipt template library construction(with Javanese/Balinese and other dialect versions)

VII. Exchange rate risk management practices

7/Guidelines for Hedging Operations
The hedging process should be initiated when the cumulative IDR to be settled exceeds the threshold.

(i) Locking in the exchange rate for the next 7 days through NDF non-deliverable forward contracts
②Sign CSA credit support attachment with licensed forex brokers to reduce counterparty risk
③Execute position balance calculation at 16:00 Jakarta time daily

7... Parameter settings for the volatility warning model
It is recommended to monitor the following metrics and set up automated alerts.

if (standard deviation σ > historical 90th percentile || 

Central Bank Intervention Signal Strength >0.7 || 

USD-IDR futures positions surge 200%) then triggers manual review...

VIII. User experience micro-innovation cases

8.|-Social e-commerce scenarios specially designed-|
Features developed for emerging platforms such as TikTokShop.

- Embedded Floating Rate Watchdog in Live Shopping (Refresh every 15 seconds)
- "Group Purchase Price Converter": enter the number of participants to automatically display the IDR cost per capita
- AR effects show the comparison of the actual purchasing power of different denominations of banknotes

8... /Offline environmental solutions/
Designed for island areas with poor network conditions.
→ USSD menu tree to implement the basic query function (95588# interactive mode)
→ SMS two-way authentication replaces OTP authentication process
→ Distributed Solution for Printing Payment Barcodes in Convenience Stores

IX. Frontiers of regulatory technology applications

9.BI-FAST's new regulation response
Compliance requirements for Indonesia's fast payment system in 2024 include.

✓ Uses SHA256-RSA dual signature algorithm
✓ All asynchronous notifications must contain theoriginalReferenceNofield
✓ Reduction of the time limit for the processing of disputes to D+3 working days

9.|Anti-money laundering special checklist|
AML Control Points for Currency Conversion Segments.

[√] Record the amount and currency of the fiat currency actually received by the final beneficiary 

[√] Maintain documentation of deviations from the original quotation and the final executed exchange rate 

[√] Mandatory facial recognition when cumulative exchange exceeds IDR 500 million in a single day...

X. Panoramic Solution Architecture

! [technical architecture]
┌───────────────┐ ┌───────────────┐ ┌───────────────┐ ┌───────────────┐
│ Front-end presentation layer │◄─►│ Intelligent Routing Engine │◄─►│ Local Financial Institution Gateway│
├óΓé¼╦£───────────────┤ ├óΓé¼╦£───────────────┤ ├óΓé¼╦£───────────────┤
-Multi-currency price caching pool -Dynamic load balancing algorithm -BCA/Mandiri leased line
-Mobile Gesture Amplifier -Machine Learning Predictive Models -BPJS Tax Calculation Module
└───────────────┘ └───────────────┘ └──────────────