OJK Appoints Aftech as "Association of Digital Financial Innovation Providers"

The Financial Services Authority (OJK) appointed the Indonesian Fintech Association (Aftech) as the Association for Digital Financial Innovation Providers (IKD) in accordance with the mandate of POJK No. 13 of 2018 concerning IKD in the financial services sector. The appointment aims to build an effective supervision system for IKD organizers.

IKD here is related to the fintech segment which has not been regulated by the OJK. This is a term from OJK which refers to it as innovation, not as an industry. So far, only two fintech industries have been regulated, namely: P2P lending and equity crowdfunding.

Deputy Chairman of the OJK Board of Commissioners, Nurhaida, explained that IKD has many positive benefits, such as increasing financial inclusion and literacy, and filling the financing gap for MSMEs.

On the other hand, there are also many risks. For that it is necessary to apply balanced regulatory framework so that relations with financial service institutions can synergize optimally. Consumer protection is also maintained.

According to him, the appointment of this association will facilitate the coordination and supervision mechanism of IKD, and is expected to increase compliance with existing laws and regulations and build synergy between IKD organizers.

"Through the formation of associations, IKD organizers will easily form a digital financial ecosystem because it consists of members with various business models. They can interact and support each other in creating a healthy digital financial sector," he explained, Friday (9/8).

The mechanism for forming this association adheres to the principle of regulation. This means that OJK only outlines the regulations, while the technical aspects of these arrangements are made by industry players.

Aftech will take an important role in formulating industry standards and developing the operations of the IKD Organizing Association, including business model behavior guidelines (market conduct) each member.

"Fintech supervision is different from banks and non-banks because the business models are different, the risks are also different. That's why we need to take market conduct, meaning we have to make this industry responsible for carrying out its innovations, not only benefiting the community but also protecting the interests of consumers," "added the Deputy Commissioner of the OJK Institute and Voluntary Digital Finance, Batunanggar.

Furthermore, the duties and authorities of Aftech as the Association of IKD Operators are regulated in the SEOJK. Appointment of the IKD Organizing Association which will be published and submitted to the public in the near future.

Wait for SEOJK to be published

Aftech chairman Niki Luhur explained that his party would form a market conduct and the ethics committee after being appointed as the Association of IKD Organizers, after receiving clear directions and boundaries from the OJK (SEOJK).

"We will start this in accordance with OJK directives. From there we will form an independent ethics committee consisting of lawyers who will review if there are issues going forward," said Niki.

He continued, "When the standards from the OJK are clear, then we will formulate sanctions and how they will be implemented. Whether it involves an investigative alert task force or something else. We need further coordination regarding this."

As of July 2019, OJK has granted registered status to 48 IKD organizers. All will be monitored closely market conduct by Aftech. Of this total, 34 organizers were selected as regulatory sandbox prototype.

OJK divides these 34 organizers into 15 clusters based on their business segments. Most of them  (15) credit scoring (4) financial planner (6) financial agent (4), and project financing (5)

After login regulatory sandboxOJK will monitor them for a year or six months if there are additional ones after that. There will be final results as a basis for drafting regulations, after considering the impact on the economy and society.

All of these IKDs must have previously been registered as members of one of the fintech associations in Indonesia, either to Aftech, AFSI, or AFPI. Aftech itself has 250 members, but only 231 companies have been included in the OJK list. Meanwhile, in the OJK list, there are 113 registered P2P lending providers and seven have received business licenses.