Indonesia’s Digital Finance Innovation Roadmap

OJK published its Digital Finance Innovation Roadmap and Action Plan 2020-2024 on 31 August 2020. The roadmap recognises that Indonesia is on its way to becoming one of the largest digital economy markets in Asia, with market players offering a wide range of innovative and interconnected financial services. 

OJK says it published the roadmap with the objective of developing a supportive and comprehensive digital financial ecosystem to create a financial services industry that is competitive, resilient and future-ready.  

Some key points in the roadmap are summarised here.

• The offering of a wide range of financial services by BigTech may raise systemic risk concerns for the regulators. Standard prudential instruments such as capital and liquidity requirements may prove inadequate. Market dominance may also lead to anti-competitive or monopolistic practices.  This may necessitate coordination of regional and global policy and regulations.

• Regulators should cooperate to minimise the scope for regulatory arbitrage. Fintech regulators should prevent risk-generating business activities migrating between regulatory authorities in search of lighter regulatory controls.

• While the existing digital banking regulations in Indonesia do not yet cover institutional and licensing aspects of fully digital banking, OJK is researching this issue and will provide support over the next few years.

• More licenses for equity crowdfunding will be issued post-pandemic. To date, only three licenses have been issued.

• OJK recognises the need for legal certainty in the effective application of fintech innovations. For example, distributed ledger technology such as smart (legal) contracts should be accepted as final settlement in secure transactions.

• OJK will review its consumer protection regulation to ensure that new consumer protection issues relating to digital finance are updated, especially in respect of transparency in digital (particularly mobile) lending practices, data privacy protection, and digital complaints management.

• OJK will work with other stakeholders to ensure the new data protection law considers the needs of financial industry consumers, including clients of fintech providers, by ensuring that data protection regulations and guidelines for financial service consumers are issued. OJK will also work with the fintech industry to make sure that data protection principles are supported in codes of conduct.

• In relation to supervisory technology (suptech), OJK is already using innovative ways to implement a risk-based approach to supervision. OJK plans to focus on data analysis, text report mining, customer support tech, and blockchain e-licensing.