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Financial Technology on Payment System in Indonesia

“In according to PBI 19/2017, payment system includes activities of authorization, clearance, final settlement, and payment.”

Financial Technology (“Fintech”) is innovation in the financial sector that can impact on monetary stability, financial system stability, and/or efficiency, fluency, security and reliability of the payment system. In connection with those impacts and to support Fintech innovation with complying the consumer protection principles and risk and prudence management, Bank Indonesia (“BI”) as payment system authority has issued BI Regulation No. 19/12/PBI/2017 on Financial Technology Organization (“PBI 19/2017”) to regulate, supervise, and monitor the Fintech ecosystem in Indonesia.

The scope of PBI 19/2017 is Fintech Providers that conduct financial services on the payment system, supporting market, investment and risk management, lending, financing or funding, capital raising, and other financial services. Aside from financial service categories that include on PBI 19/2017, the scope of PBI 19/2017 also includes the Fintech Providers which is under the competency of other authority and provide Fintech in the payment system.    

Scope of Fintech on Payment System

In according to PBI 19/2017, payment system includes activities of authorization, clearance, final settlement, and payment. As for example, Fintech on payment system is the utilization of blockchain and distributed ledger for the organization of money remittance, electronic money, electronic wallet, and mobile payment.

Aligned with PBI 19/2017, BI Regulation Number 18/40/PBI/2016 on the organization of payment transaction process (“PBI 18/2016”) has stipulated that payment transaction process includes activities of pre-transaction, authorization, clearance, final settlement, and post-transaction. Furthermore, the payment system providers are consist of principal, switching provider, issuer, acquirer, payment gateway provider, clearance provider, final settlement provider, money remittance provider, electronic wallet provider, and other payment system providers.

As for the example of one registered Fintech payment system in BI is “Brankas” that provide a platform which integrated with several Banks to facilitate direct payment, direct access to real-time transaction data of the consumer (support financial service institution in accepting loan application), and disburses payment.

Scope of Fintech in PBI 19/2017

Fintech providers in PBI 19/2017 must fulfil several criteria as follows: innovative, have an impact on existing products, services, technology, and/or existing financial business model, provide benefits to the community, can be used widely/public, and other criteria that stipulated by BI.

Furthermore, the scope of Fintech in PBI 19/2017 is consist of:

  1. Payment system Authorization, clearance, final settlement and payment
  2. Supporting market Utilization of information and/or electronic technology to provide faster and cheaper information related to financial products and/or services to the public. For example, Fintech that provides comparative data on information of financial service products.
  3. Investment and risk management. Fintech that provides online investment product and online insurance
  4. Lending, financing or funding, and capital rising. Fintech that provides peer-to-peer lending and crowd-funding
  5. Other financial services

Aside from the aforementioned varied scope of Fintech in PBI 19/2017, BI has stated that BI authority on Fintech mainly on payment, clearing, and settlement categories.

In according to the list of registered Fintech provider in the BI[1], the registered Fintech provider is mostly includes to a category payment system, supporting provider (data centre or disaster recovery centre provider, payment instrument and/or payment transaction security features, routing, etc) and supporting the market.

The requirements as Fintech Providers

In pursuant to PBI 19/2017 and Regulation of Members of The Board of Governor Number 19/15/PADG/2017 on Registration Procedure, Information Submission, and Monitoring of Fintech Provider (“PADG 19/2017”), there is no specific capital requirement (amount and foreign investment limitation) for the company (business/legal entity) that will be registered to BI.

Hereafter, during the process of registration, the company must be represented by the Board of Directors or organizing committee. PBI 19/2017 or PADG 19/2017 are not specifically stipulated the competency requirement of Director or committee. However, the Director or committee must fulfil compliance commitment on behalf of the company, which are:

  1.  Applying the principle of consumer protection;
  2.  Maintain the confidentiality of consumer data and information of transaction;
  3.  Applying risk and prudence management;
  4. Using of Rupiah currency on every transaction in Indonesia territory;
  5. Applying anti-money laundering and countering of terrorist financing principle; and
  6. Fulfil other prevailing laws and regulations

Author: Kristalia Andiani Puteri

Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include capital market and Fintech Services.

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