Authorities pledge support, to issue rules for fintech 

Financial regulators are readying rules that will target financial technology businesses without limiting their room for growth as President Joko “Jokowi” Widodo pledges support for the infant industry.

“I urge all parties to participate in fintech, IT and financial technology. I will continue to discuss and allow for breakthroughs for digital applications, so as to increase our financial inclusion. Let us together build synergy,” Jokowi said during his speech at the Indonesia Fintech Festival & Conference on Tuesday.

During the event, Bank Indonesia (BI) and the Financial Services Authority (OJK) unveiled plans to issue rules before the end of the year to regulate fintech players’ activities in digital payment, lending, capital market actions and non-bank financial services so they could operate safely. The burgeoning industry has seen an estimated Rp 40 trillion (US$3 billion) in transactions over the past two years.

The OJK regulations will detail minimum capital requirements for each sub-sector, “know your customer” (KYC) rules that will be much more relaxed than those applied to formal financial institutions, as well as good corporate governance standard practices, among other aspects.

“We will issue simple regulations, including on market conduct, because there are a lot different types of fintech [businesses], which require different treatment in terms of regulations,” OJK commissioner for the non-banking financial industry Firdaus Djaelani said. “The capital rules should not kill the creativity of these fintech players.”

An OJK regulation (POJK) will be issued before the end of this year, and starting next year all fintech players, including startups, will be required to register with the OJK and will then be given around one year to comply with the upcoming regulations.

BI will issue a BI regulation (PBI) around the same time to cover online payment service providers. The rules would require all payment service providers to be registered as Indonesian legal entities, conduct transactions in rupiah and use local banks for every transaction in Indonesia, BI deputy governor Ronald Waas said.

“The existing regulation only covers credit, debit cards and electronic money, but we haven’t covered internet payment gateways. That’s going to be part of the object of the regulation,” he added.

Around 61 percent of local fintech players describe the current regulatory process as lagging and not very clear, and they demand clear regulations and partnership with regulators, according to a recent survey from global consulting firm Deloitte in conjunction with the Indonesian Fintech Association.

“We need an open enough environment to allow startups to fail in a controlled way, experiment and keep innovating,” said Go-Jek CEO Nadiem Makariem. “So rules about limits, the amount of finance, KYC constraints without providing a sufficiently large playing field, you’ll never know if those rules should actually be there in the first place.”

Aside from Jokowi, BI governor Agus Martowardojo, Finance Minister Sri Mulyani Indrawati, Coordinating Economic Minister Darmin Nasution, Trade Minister Enggartiasto Lukita and the Indonesian Chamber of Commerce and Industry (Kadin) threw their support behind the fintech industry at the Indonesia Fintech Festival & Conference event.

They all hope fintech will improve financial inclusion in Indonesia, where only a fifth of the population have bank accounts, while a third have access to the internet. There are more mobile phones than people in the country.

Financial education is also relatively poor in Indonesia, where only 21.8 percent of the population are considered financially literate, compared to 96 percent in Singapore, 81 percent in Malaysia and 78 percent in Thailand.

Source: The Jakarta Post

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