Many New Initiatives Born at Indonesia Fintech Festival & Conference Day Two

The biggest event for the financial and technology industry in Indonesia has been completed, the result of the collaboration between the Financial Services Authority (OJK) and the Indonesian Chamber of Commerce (Kadin). Many guests of honor were present here, starting from the President of the Republic of Indonesia Joko Widodo, Minister of Finance Sri Mulyani, Governor of Bank Indonesia Agus D Martowadojo, and other ministers.

The government openly supports the development of the financial technology industry (fintech) by issuing various regulations to encourage the development of its ecosystem. President Joko Widodo said fintech could be a solution to expand access for Indonesian people who are in remote areas and have not been reached by financial services from banks.

"For example, for SMEs, financial records are still rare because they feel complicated. This makes it difficult for them to access capital from banks. This also indicates that the level of financial inclusion needs to be increased from the most basic thing, namely by increasing people's financial literacy," said the President, Tuesday (31/8).

The President also wants to invite all Indonesian people to participate, especially young people engaged in fintech so that they can continue to produce breakthroughs such as digital applications that are useful in increasing financial inclusion.

Finance Minister Sri Mulyani added that the government would formulate policies, regulations, and regulatory frameworks to encourage the fintech industry to develop further. In fact, he continued, if needed, there will be certain incentives and facilities that fintech can enjoy so that the industry can become a force in the future to encourage Indonesia's economic growth. The impact, he continued, would be to reduce unemployment, increase job opportunities, and finally solve the problem of poverty and welfare. "Therefore, I am willing to sit down together so that we can all identify what policy framework is needed so that Indonesia can quickly grow fintech that can expand opportunities," said Sri.

Regulators will issue rules

As the central bank, BI Governor Agus D Martowadojo said next month BI will issue a BI Regulation (PBI) related to fintech, namely regarding payment transaction processing. Several points will be included by BI, starting from fintech companies that must be legal entities, are required to conduct transactions in Rupiah, and are required to store liquidity in banks. "We want to give general direction if there are international fintech players who enter Indonesia. Then, the transaction must be in Rupiah, and the deposit of funds must be in the bank," said Agus.

In general, BI distinguishes fintech companies into four main groups. First, the deposit, lending, and capital rising groups. This group also includes crowdfunding and peer-to-peer lending business models.

Second, group payments, clearing, and settlement, including payments through mobile and desktop sites. Finally, the market provisioning and investment group, and risk management.

BI, he continued, will build a fintech office, a special assistance in developing its business. Then, views on Indonesia's monetary and macroprudential policies will be given so that they are more familiar with the business climate. Then, BI will also take the initiative to launch an incubator.

Next, OJK will issue rules for two fintech segments. First, fintech regulations will be more directed at the company. Meanwhile, fintech startups will be given leeway.

Chairman of the OJK Board of Commissioners Muliaman D Hadad said the regulations would be kept simple to prevent fintech startups from being difficult to develop. "We are currently finalizing the regulations to make them fit, otherwise most of the rules will die," he said.

For new fintechs, there are two segments that will be regulated by OJK, namely crowdfunding and digital payments. Crowdfunding within the framework of OJK regulations, will regulate and supervise funding aspects from the angle of investors who must comply with related regulations (BI, BKPM, and DGT) disclosure, prudential, and personal data security.

Digital payments will be regulated regarding supervision of disclosure, prudential aspects related to the products offered, personal data security, and security of deposit funds in digital form. Then the coordination and supervision arrangements with BI and the Ministry of Communication and Information on aspects of digital funds.

Meanwhile, OJK will also issue new rules for IKNBs that transform into fintech. There are three industry segments that will be regulated, financing & ventures to become marketplace lending, insurance to become specialist insurance markets, and IKNB agents & brokers fintech advisors.

"We are targeting all of these regulations to be issued as early as next October or at the latest before the end of this year," said Firdaus Djaelani, Chief Executive of the IKNB Supervisor.

Collaboration form

From the business community, on the second day IFFC has inaugurated several strategic partnerships. First, between digital investment portal Bareksa and electronic payment provider DOKU. This collaboration allows DOKU users to invest their money in mutual fund instruments.

Then, the collaboration between Bank Danamon and Investree for the purpose of the cash management system. Lastly, between Bank Sinarmas and Dimo ​​Pay and Cashlez.

[See also: 2016 Fintech Indonesia Survey: 61 Percent of Fintech Startups Think Regulations in Indonesia Are Unclear]

From the results of a Deloitte Consulting survey, more than 70 fintechs in Indonesia really hope for collaboration with financial institutions. More than half said collaboration was very important to develop the potential of Indonesia's financial industry in the future.

In more detail explained in the survey, the majority of fintechs want to collaborate with local financial institutions (66,2%), local fintech (47,1%). They also want to form collaborations with local corporations or conglomerates (44,1%) and local technology startups from other industries (44,1%).

- Disclosure: DailySocial is one of the committee members of Indonesia Fintech Festival & Conference 2016