Fintech poised to make a difference in Indonesia

The Indonesian government must support the innovation of financial technology to accelerate financial inclusion, said the Coordinating Minister for Economic Affairs of the Republic of Indonesia, Darmin Nasution at the Indonesia Fintech Summit & Expo (IFSE) 2019 in Jakarta, Indonesia in late September 2019.

"Everyone must support the rapid technological advancement in the financial sector so it can provide benefit to the public. Improving the access to the financial services and products will drive and increase the national economy," said Darmin at the event, which was themed Innovation for Inclusion.

He added that to support the growth of fintech in Indonesia, the government will emphasise a light touch and safe harbour approach.

The Minister of Finance of Indonesia, Sri Mulyani, said the development in Indonesia must be inclusive and non-discriminative. She said the government's investment in the infrastructure sector is part of the effort to support the development, including in the technological and fintech sectors, to enable everyone to access it. She said the Finance Ministry will continue to support the industry through regulations based on the above-mentioned approaches.

The Governor of Bank Indonesia, Perry Warjiyo, noted that Bank Indonesia is very committed to develop payment systems and facilitate the development of financial inclusion. Bank Indonesia welcomes any collaboration to realise the digital economy and digital finance as the sources for economic growth. One supporting programme deals with the digitisation of non-cash social assistance, which affects 15.6 million households. The transportation sector has been digitised, and also government transactions.

Another initiative is the end-to-end integration of the payment system with the digital economy, involving banks, fintech, and e-commerce as well as the public and the central bank. Bank Indonesia is also ensuring that financial technology is integrated at banks to prevent the risk of shadow banking. Entities which providing banking services but which are not subject to regulatory compliance would be considered part of the shadow banking economy.

Fourthly, Bank Indonesia is ensuring the balance between innovation and consumer protection, integrity, and stability as well as a healthy competition by, among others, strengthening the regulatory sandbox.

Fifth, the central bank is keeping the national interest in the cross-border digital financial economy by requiring that domestic transactions be processed in Indonesia, with the cooperation of local and foreign operators, including foreign central banks, whilst maintaining reciprocity.

The governor of Bank Indonesia also mentioned that Bank Indonesia has issued a number of policies to support the development of the payment system in Indonesia, such as the QR Code Indonesia Standard (QRIS), launched August 2019, and the refinement of the Bank Indonesia National Clearing System (SKNBI). Moving forward, he said that relationships between stakeholders must be strengthened to support the digital economy and digital finance as the sources of economic growth, as well as creating the ecosystem that drives the innovation of both the digital economy and finance.

Financial Services Authority (OJK) Chairman Wimboh Santoso said people need to optimise the development of the information technology to support inclusive economic growth and improve the efficiency of the transactions in the financial sector. On the other hand, fintech consumers' protection must be achieved through the implementation of a code of conduct by fintech associations, and regulations on the protection of consumers' data.

OJK is committed to supporting fintech and digital finance innovation. Various OJK regulations (POJK) regulate fintech, such as POJK No.77/2016, POJK No.13/2018, and POJK No.37/2018. Currently, there are 48 fintech companies listed in 15 clusters of digital financial innovation, 127 registered peer-to-peer lending companies as of August 2019, and one registered equity crowdfunding company.

Indonesian Fintech Association (AFTECH) Chairman Niki Luhur said the value-add of the fintech industry lies in its distribution mechanisms. "Fintech is utilising the latest channels such as through websites, mobile gadgets, and others. This allows fintech players to reach out to the public, even those in remote areas, who cannot enjoy financial services and products of conventional banks," said Niki.

Niki also emphasised the importance of cross-industry collaboration to provide consumer protection from fraud, cybercrime, and others. Consumer data protection is one of the major concerns of the fintech industry and the government since the fintech industry relies heavily on consumer data in processing transactions. Therefore, the industry needs clear and firm regulations on consumer data governance, use, and protection, he said.

IFSE 2019 is the largest fintech event in Indonesia and is jointly hosted by OJK, Bank Indonesia, and AFTECH, with the support from the Indonesia Joint Funding Fintech Association (AFPI), and Indonesia Sharia Fintech Association (AFSI). The event was attended by more than 800 delegates from regulatory bodies, the government, donor institutions, fintech players, researchers, and the finance sector. Over 100 fintech, financial, and technology companies exhibited at the event in categories such as P2P Lending, Digital Payment, Wealth Management, Digital Financial Innovation (Market Provisioning/Aggregator, Enabler, Equity Crowdfunding, Insuretech, and others), as well as Sharia Fintech. 

The Indonesian Fintech Association (AFTECH), as the umbrella organisation for all fintech companies in Indonesia, has to date 280 members, of which 250 are fintech companies operating in various sectors such as digital payment systems, online lending, digital financial innovation, insurtech, equity crowdfunding, and others. IFSE 2019 is the realisation of the fintech industry's commitment to support the financial inclusion target of 75% by 2019.