The rise of digital financial innovation in Indonesia

Following the rise of web utilization and extra superior smartphone expertise in addition to the event in info and expertise within the final decade, Indonesia has witnessed the rise of so-called Digital Monetary Innovation (DFI) corporations. These corporations supply progressive tech-based monetary companies, which are sometimes not particularly coated by the present regulated fashions. 

DFI corporations are supervised by Indonesia’s Monetary Companies Authority (OJK), which has publicly acknowledged the position of DFI corporations in serving to to speed up monetary inclusion in Indonesia. These corporations assist present simpler monetary entry to people and companies, they usually turn into a catalyst for the speedy development of the digital financial system by providing a variety of progressive and interconnected monetary companies. 

To function a DFI enterprise in Indonesia, overseas traders should set up a restricted legal responsibility firm (Perseroan Terbatas) and register themselves with the OJK. Registration exemption applies solely to corporations which can be already registered with the OJK or in any other case have obtained a license from the OJK and supplied the OJK with the registered enterprise mannequin with their merchandise remaining unchanged. The failure of a DFI firm to adjust to the registration requirement might entice sure sanctions.

If a DFI firm has a particular enterprise mannequin, the OJK can require the corporate to be positioned within the so-called ‘regulatory sandbox’ for additional evaluation. There are 15 DFI fashions within the regulatory sandbox, together with: 

• A monetary aggregator, web-based platform, or application-based platform developed to help prospects by offering monetary product info and permitting prospects to check comparable merchandise from totally different monetary corporations. Examples embody housing finance, bank cards, financial institution financial savings, and insurance coverage merchandise.
• Another credit score scoring, web-based platform, or application-based platform focuses on analysing and processing a borrower’s non-credit knowledge to generate the borrower worthiness score for monetary corporations. 

As of January 2022, the OJK recorded 83 DFI corporations. The aggregator, credit score scoring, and financing agent fashions had been the preferred fashions on the checklist.

Private knowledge safety

DFI corporations should guarantee private knowledge safety. Pending the issuance of the primary single complete normal legislation on private knowledge safety, DFI corporations are topic to private knowledge safety obligations as regulated below the Minister of Communication and Informatics (MCI) Regulation and the OJK Regulation. 

Listed here are the important thing highlights of the above rules:

• Private knowledge means info on a person that may be recognized, both immediately or not directly;
• Any acts of accumulating, analysing, distributing, transferring, deleting, and displaying private knowledge should be based mostly on the information topic’s written consent, both manually or electronically, within the Indonesian language;
• The switch of non-public knowledge to offshore international locations should be reported to the MCI, each earlier than and after the motion.  

Unlawful practices

Though the OJK could seem like supportive of all developments which can be taking place within the monetary companies sector, it nonetheless has deep considerations concerning the enterprise conduct of the business gamers, significantly in relation to shopper safety. 

Such OJK considerations usually are not with out motive. Native Indonesian information media have reported that some on-line platforms, akin to Binomo, Fahrenheit, and Quotex, have been below police investigation for fraud allegations. Indonesia has seen the rise of digital platforms claiming to be buying and selling platforms or funding platforms, however which in truth supply playing schemes or different unlawful or fraudulent practices. 

Given the latest instances and the growing variety of police reviews filed by retail traders falling sufferer to those illicit platforms, we count on that the regulator will proceed monitoring the enterprise conduct of the gamers with the utmost warning and stricter supervision, to make sure most shopper safety and the correct use of non-public knowledge.

Jeanne Elisabeth Donauw

Accomplice, Walalangi & Companions

Andhika Indrapraja

Affiliate, Walalangi & Companions

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