“The term Fintech has been confirmed to be financial services that are innovative, tech-based, and beneficial to the currently existing financial services and the public in general.”
Fintech is an acronym of Financial Technology. Technically speaking, the term encompasses any technology that seeks to improve financial services, such as mobile payments, crowdfunding platforms, and many others. Legally speaking, the usage of technology in the financial aspect has been regulated in Indonesia since as early as 2009 with Bank of Indonesia Regulation (PBI) No. 11/12/PBI/2009 on Electronic Money. However, the term Fintech is not a thing until as late as 2017 with the issuance of PBI No. 19/12/PBI/2017 on Implementation of Financial Technology. Before 2017, the term Fintech was nothing but scattered in regulations related to tech-based financial services such as gateway payment regulation and peer to peer lending regulation. Some other financial services which are arguably a Fintech (such as electronic money) didn’t even mention the term and thus make it harder to distinguish which service is considered a Fintech. However, with the issuance of Bank of Indonesia (BI) regulation on Implementation of Fintech and Indonesia Financial Services Authority (OJK) regulation on Digital Financial Innovation, the term Fintech has been confirmed to be financial services that are innovative, tech-based, and beneficial to the currently existing financial services and to the public in general.
The Authority of Fintech in Indonesia
Technically speaking, Fintech could be connected with many authorities depending on its usage. However, given that there are only a few regulated Fintech so far, the only authorities of Fintech as of right now are BI and OJK. BI was the first to address Fintech matters by issuing the umbrella regulation. However, BI is pretty specific on only regulating Fintech related to the payment system. The umbrella regulation of Fintech issued by BI is PBI No. 19/12/PBI/2017 on Implementation of Financial Technology. The regulation addresses different kinds of Fintech, including ones related to payment services, market support, investment management, lending, financing, and other financial activities not listed in the regulation; however, it only regulates ones related to the payment system. Fintech unrelated to the payment system is still considered as Fintech, but it is not bound to the rules and obligations set by BI in this PBI.
Following the footsteps of BI, OJK also issued an umbrella regulation on Fintech. However, unlike BI, OJK’s regulation No. 13/POJK.02/2018 is not limited to a specific type of Fintech but instead for any other Fintech not yet regulated by other Authority. This POJK addresses more types of Fintech, including ones related to transaction settlement, equity funding, investment management, fund transfer, insurance, market support, and other financial activities not listed in the regulation yet. This POJK doesn’t stipulate specific regulations for each of those Fintech, but rather put every Fintech under the same obligation of going through registration and testing in OJK.
Despite being the only Authorities on Fintech, both BI and OJK admit that it is possible that some Fintech would be more relevant with other authorities. BI in PBI No. 19/12/PBI/2017 specifically states that any Fintech unrelated to the payment system is not under their authority while OJK in POJK No. 13/POJK.02/2018 states that if there’s a Fintech related to the authority of other institution, OJK will cooperate with the relevant institution in regulating the said Fintech.
The List of Fintech Already Regulated in Indonesia
The core concept of Fintech is an innovation, thus it would be counterproductive to limit the type of Fintech in the regulation. The aim of BI’s and OJK’s umbrella regulations is to cover the Fintech that has not been regulated yet, thus any Fintech that fits the criteria could be registered and tested to see the applicability in Indonesia. However, other Fintech that already have their specific regulation is not covered under the umbrella regulations and instead are bound to their specific regulations. So far, some of Fintech that already have their specific regulations are as follows:
Fintech under BI
- E-Money
E-Money is a tool of payment which has a certain amount of money digitally stored in a server/chip. This is one of the early Fintech to be regulated by BI, starting from the PBI No. 11/12/PBI/2009 until the latest amendment with PBI No. 20/6/PBI/2018 on Electronic Money. - E-Wallet
E-Wallet is an electronic service used to store data on the payment instrument. It is regulated under PBI No. 18/40/PBI/2016 on Implementation of Payment Transaction Process. - Payment Gateway
Payment Gateway is an electronic service used to process payment transactions for its user in various ways. Similar to E-Wallet, Payment Gateway is regulated under PBI No. 18/40/PBI/2016 on Implementation of Payment Transaction Process.
Fintech under OJK
- Peer to Peer Lending
P2P Lending is a digital lending service that utilizes an electronic system to match up people who offer lending and people who need lending. It is regulated under POJK No. 77/POJK.01/2016 on Tech-based Money Lending. - Mutual Fund Marketplace
Traditionally, a mutual fund can only be offered by the issuer or through a partner Bank. Mutual Fund Marketplace is a digital marketplace service in which various Mutual Funds from different issuers are offered by a Mutual Fund Securities Trading Agent. IT is regulated under POJK No. 39/POJK.04/2014 on Mutual Fund Securities Trading Agent. - Equity Crowdfunding
Equity Crowdfunding is a share offering service operated by a 3rd party which offers shares directly to the investors. It is regulated under POJK No. 37/POJK.04/2018 on Equity Crowdfunding.
All the above regulations generally regulate the same thing, the parties responsible for operating the related Fintech will have to acquire licenses from the relevant authority and submit scheduled reports on their business. Other Fintech that don’t have their specific regulations are still allowed to be operated under the coverage of the umbrella regulation, however, they would need to be tested in a regulatory sandbox by OJK for approximately a year.
Author: Benedictus Giovanni
Gaffar & Co. is an Indonesian Boutique Law Firm that focused on commercial law areas includes capital market and financial services.
For further queries and information, contact us:
+62 21 5080 6536 | info@gaffarcolaw.com | www.gaffarcolaw.com
