Bank Indonesia: Not All Fintech Can Enter BI Fintech Office

Today (14/11) Bank Indonesia inaugurated the Bank Indonesia Fintech Office (BI-FTO), which is a unit/task force within the central bank. It aims to maintain a balance between innovation and risk management in fintech, formulate regulations that prioritize consumer protection, and strengthen coordination with related parties.

Governor of Bank Indonesia Agus Martowardojo said, "Technological innovation is a necessity. With the rapid changes landscape that is, regulation should not try to precede innovation. However, we believe regulation should always be close to innovation."

"The establishment of BI-FTO is our effort to maintain levels of playing field through a balanced and proportional regulatory regime without having to turn off the pace of innovation," Agus continued.

The role of BI-FTO is divided into four functions, namely as a catalyst or facilitator, Business intelligence, assessment, and finally as coordination and communication.

In terms of being a catalyst or facilitator, BI serves to provide a forum for the exchange of innovative ideas and information for fintech development. Whereas in terms of Business intelligence, BI-FTO will be an institution that facilitates the techniques and tools to transform raw data into the latest information for analysis.

From the side assessment, BI will do monitoring and mapping the potential benefits and risks of the fintech business model, as well as developing policy responses including implementing regulatory sandbox. Meanwhile, in the coordination and communication function, BI will provide one-stop services for fintech to understand BI's policy and regulatory framework in support of fintech, and coordinating cross-authority initiatives.

However, not all fintech can enter the BI-FTO. Because, according to Agus, as part of the function assessment carried out by BI-FTO there is an initiative called regulatory sandbox.

This initiative can be analogized as a laboratory that is shared by actors fintech and regulators to test business models and products or services fintechh before entering into a full licensing regime.

He continued, this test was carried out in a limited environment to ensure the identification and mitigation of all risks that might arise. Restrictions are given in the form of a license that is limited to the service, period, or area of ​​operation.

Ronald Waas, Deputy Governor of BI, added several examples of business models that are not included in the BI-FTO, such as e-wallet and e-money. He emphasized that BI-FTO is devoted to the business segment fintech classified as new and not yet regulated by BI as the payment system authority.

"Those who can enter are only those who are breakthrough or is new. All will return to the scope of business. As for the transfer of funds, e-money, and e-wallet, BI has already arranged for it," said Ronald.

The central bank itself cannot reveal what kind of business model will emerge in the BI-FTO. Because the whole business model fintech delivered directly by the innovations created by business actors.

So far, BI has issued regulations for payment systems for Card-Based Payment Instruments (APMK), Electronic Money, and Fund Transfers.

The central bank itself groups four main categories of business fintech which will be under it, namely the first payment, clearing, settlement. Second, deposits, lending, capital raising. Third, market provisioning, and last investment and risk management.

Up to now, the market share of activity fintech in the country is still dominated by the first group with a percentage of about 56%. Then, based on Statista data, this year the value of fintech transactions in Indonesia is estimated to have crossed the USD 14,5 billion figure.

PBI PTP will regulate the ownership structure of the operator

In the PBI regarding the Implementation of Payment Transaction Processing (PBI No. 18/40/PBI/2016), BI issued as a form of commitment to four main things. Namely, (1) accommodate innovation, (2) improve security, including compliance with standards and regular security audits, (3) maintain levels of playing field, and (4) consumer protection in the midst of threats fraud and cyber crime.

This rule regulates two main subjects in a PTP activity, namely the SP (Payment System) service provider, as the party responsible for the stages of authorization, clearing and settlement. This party includes the organizers switching, payment gateway, and electronic wallets are required to have a license from BI.

Second, payment transaction support providers such as card providers, ATMs, EDCs, and data centers. In this case, service providers need to request cooperation approval and are responsible for ensuring the security and smoothness of the transaction processing they facilitate.

Ronald added that for consumer protection and a better security system, PBI will also regulate minimum ownership fintech is 80% owned by a person or in the form of a local legal entity.

"In the future, it will no longer be physical warfare, but cyber warfare. We value this to be important, so we have to start protecting consumer information assets properly, starting from setting the percentage of ownership to be controlled locally," he concluded.