Who Regulates Fintech Companies in Indonesia?
Financial technology or fintech is increasing in Indonesia. According to United Overseas Bank (UOB), PwC, and Singapore Fintech Association (SFA), at the end of 2021, there were 785 fintech companies in Indonesia. This number almost doubled from 2017, only reaching 440.
The rise of digital banks and open banking systems, where related financial parties can access each customer's information, has brought this number to keep increasing.
However, several parties regulate fintech companies in Indonesia to keep them under government control. The purpose is to maintain their interest rate and accessibility and ensure they keep reporting their revenue or cumulative transaction in a year to the government. So, which parties are assigned by the government to regulate fintech companies in Indonesia?
Who Regulate Fintech products and service in Indonesia?
1. Bank Indonesia
Bank Indonesia, or BI, is the central bank in Indonesia and the main party who make rules and regulations for fintech companies in Indonesia. Therefore, BI has a role in supervising the banking and payment system to ensure the state's financial system stability. If the state's financial system is in good condition, it will positively impact economic growth.
To ensure that fintech companies are participating in securing Indonesia's financial system and increasing economic growth, BI as regulator established BI Fintech Office 2016 to monitor the financial activity of the companies. Besides, the BI fintech office takes an active role in ensuring customer protection, mapping the fintech industry in Indonesia, and creating regulations regarding financial services offered by fintech.
In the opening speech of the Indonesia Fintech Summit (IFS) 2021 in Bali, BI governor Perry Warjiyo explained the latest BI programs to support digital transformation in Indonesia. These programs include:
- Issuing BSPI 2025 to monitor the structural reform efforts of the Indonesian economy towards digital transformation.
- Launching a national standardization in the payment system through QRIS and SNAP.
- Preparing digital innovation through reliable payment system services called BI-FAST.
- Carrying out regulatory reforms in the payment system.
2. Otoritas Jasa Keuangan (OJK)
OJK is a state institution that organizes an integrated regulatory and supervisory system for all activities in the financial services sector, which includes the banking sector, capital market, and non-financial services sectors such as insurance, retirement funds, financing institutions, and other financial services institutions.
OJK takes an active role in providing regulations and overseeing fintech-based companies. OJK is tasked with reviewing and studying fintech developments and preparing rules and development strategies.
In order to prevent illegal fintech companies, OJK also established Satgas Waspada Investasi (SWI) to monitor the list of registered fintech companies. They will make an audit and immediately ban the fintech companies that have not registered, put high interest on customers, or use aggressive methods to collect the overdue installment. Until last year, SWI had 3,198 illegal fintech companies, most of them offering a loan service to customers.
3. Asosiasi Fintech Indonesia (AFTECH)
The last institution set by the government to regulate fintech companies in Indonesia is Asosiasi Fintech Indonesia or AFTECH. OJK established AFTECH to provide a safe place for fintech companies and one that emphasizes the enforcement of government regulations. AFTECH also takes an active role in protecting companies from cybercrime.
AFTECH research shows that 22 percent of payment fintech platforms and 18 percent of fintech lending companies have experienced cyber-attacks. As many as 95 percent of 154 fintech companies admitted that they shared the cyber attack, while less than 100 companies experienced did not admit to cyber-attacks.
Therefore, AFTECH takes a role in collecting the company's complaints and encourages others to be more transparent regarding cyber attacks so the government, through OJK and BI, can assist.
BI, OJK, and AFTECH have essential roles in ensuring the safety of fintech companies during their operation. However, it is also vital for the company to keep operating according to regulation so the state's financial system is stabilized, supporting the nation's economy to thrive.