Clearing process: What is it and how it works in Indonesia

What is clearing?

In finance, clearing refers to the process of settling transactions and transferring financial instruments such as cash, securities or bonds between parties. Think of it as the behind-the-scenes process that ensures transactions such as interbank transfers, bond purchases or securities trades are processed smoothly.

In Indonesia, the concept of clearing is often associated with money transfers between banks. Funds are transferred from one bank to another via a clearing house, which ensures that the transactions are securely checked and balanced. These transactions are processed in batches, making it a reliable method for larger transactions.

Bank clearing in Indonesia is managed by Bank Indonesia (BI) through the National Clearing System (SKNBI). This system allows banks to exchange either physical documents or electronic financial data (DKE) to efficiently process transactions, whether for the bank’s own accounts or on behalf of its customers.

Although the settlement process is similar to normal bank transfers, it takes longer, usually around two to three business days. This delay is due to the fact that the process involves several steps: transmission of funds to BI, settlement by BI and then distribution to the recipient bank.

Despite the time involved, clearing is very valuable for business transactions, especially for the secure and reliable management of high-value fund transfers.

Advantages of clearing

The clearing system offers its users several advantages:

• Improves payment efficiency through bulk and forward transactions.
• Enables large transactions to be processed securely and quickly.
• Standardizes transactions between banks, reducing errors and inconsistencies.
• Ensures transparency by allowing all parties to monitor the clearing process.
• Reduces credit risk between banks by allowing a clearing institution to act as an intermediary.

How clearing works

Two important players are involved in the clearing process:

• The participants: These are the banks or institutions that initiate the clearing transactions.
• Clearing institutions: They facilitate, verify and settle transactions between the participants. For example, Bank Indonesia manages SKNBI for interbank transactions, while KPEI (PT Kliring dan Penjaminan Efek Indonesia) acts as a clearinghouse for stock exchange transactions.

To initiate a clearing process, participants must go through two important phases: submission clearing and return clearing. And this is how it works:

1. Submission clearing

This phase refers to all activities in which the sending banks submit instructions for money transfer to other clearing participants, resulting in two types of documents:

• Outgoing debit document: This document is issued by the sending bank to the clearing institution or another bank. It serves as an instruction to debit or withdraw the specified amount from the sender’s account.
• Outgoing credit document: This document is issued by the sending bank and serves as an instruction to other clearing participants to credit funds to the recipient's account through the clearing process.

2. Return clearing

Return clearing refers to a phase in which the recipient banks settle the incoming funds and credit them to the recipient account, resulting in two types of documents:

• Incoming debit document: A document received by the recipient bank informing that there are funds that need to be withdrawn and cleared.
• Incoming credit document: This document, received by the beneficiary's bank, confirms that the customer is entitled to the transferred funds. Simply put, it confirms that the funds are ready to be credited to the recipient's account.

Types of clearing

Clearing transactions are categorized according to the extent of their coverage:

1. General clearing

This type covers interbank transactions on a national level. Bank Indonesia manages all interbank transactions throughout Indonesia through SKNBI to ensure smooth settlement throughout the country.

2. Local Clearing

Local clearing covers interbank transactions within a specific geographical region. As it covers a smaller area, this process is generally simpler than general clearing.

3. Inter-branch clearing

This involves transactions between the branches of different banks within a region, with settlement taking place via a specific branch.

Four types of clearing systems

Clearing systems differ according to the degree of automation. Here are the four main types:

1. Manual system

In this system, participants handle the entire clearing process manually — from the creation of balance statements to the selection of clearing documents.

2. Semi-automated system

The system offers partial automation to facilitate clearing, but the preparation of balance statements and the selection of documents still requires manual effort.

3. Automated system

An automated system handles local clearing with automated balance sheet calculations and document selection.

4. Electronic clearing system

This fully digital system processes all transactions electronically, including balance calculations and document preparation.

National Clearing System of Bank Indonesia (SKNBI)

As already mentioned, clearing activities in Indonesia are closely linked to the SKNBI system. SKNBI is Bank Indonesia’s official infrastructure for processing electronic financial data (DKE) and managing scheduled money transfers and clearing.

The system aims to facilitate easy money transfers between customers of different banks.

SKNBI services

SKNBI was established in 2005 and offers various payment services including:

• Fund transfer services: Enables transfers with a maximum amount of Rp1 billion from one sender to one recipient.
• Debit clearing services: Enables the collection of funds with a maximum amount of Rp500 million in accordance with Bank Indonesia Regulation No. 17/9/PBI/2015. Debit documents include checks, transfer vouchers and debit notes.
• Regular payment services: Enables scheduled payments from one sender to one or more recipients.
• Regular collection services: Enables the collection of funds from a sender to one or more recipients.

Enjoy effortless local transfers with Aspire

From the above, it is clear that clearing is a common method for business money transfers. However, business owners often want to quickly capture their clearing transfer data in their transaction reports to save time.

With an Aspire Business Account, you can seamlessly integrate clearing transfer data into your accounting software.

With Aspire, you can make local transfers via multiple methods, including BI Fast, Real-Time Gross Settlement (RTGS), Real-Time Online (RTO) or SKNBI. Aspire automatically selects the best transfer method based on the amount entered in your dashboard.

In addition to domestic transfers, Aspire supports sending and receiving funds in over 30 currencies at transparent and competitive fees. You can also schedule bulk payments to ensure important payments are made on time.

Discover Aspire’s additional features to improve the financial management of your business. Want to find out more? Contact our professional team today!