Controlling the Fintech Industry with a Legal Umbrella

The smoldering fintech industry continues to show its position as one of the industries that deserves to be reckoned with in Indonesia. The country with a population of 250 million people with the penetration of internet users continues to grow, making Indonesia increasingly ogled by various foreign players to participate in playing in this sector.

Currently, the OJK records that there are around 130 fintech companies operating in Indonesia with a total transaction value of US$3,6 billion. Estimated this year the number has doubled to 250 companies.

With the increasing number of fintech players, automatically regulators must always be ready to maintain the ecosystem by issuing a number of regulations and collaborating with associations. The goal is that the fintech industry continues to run according to the corridor.

The approach taken by regulators before issuing regulations is now somewhat different. Regulators are no longer "fierce" in controlling business people, but are more nurturing by allowing new companies to grow first while monitoring what innovations need to be regulated.

After OJK issued POJK Number 77/POJK.01/2016 to regulate business p2p lending "off balance sheet", OJK's next step is to discuss the issuance of the next regulation for p2p lending "on balance sheet". The latest news is that this regulation will be issued by the end of this year.

OJK will regulate digital insurance marketing

OJK's attention is not only fintech engaged in p2p lending. Currently, OJK is discussing other regulations related to digital insurance marketing. However, the settings will be done gradually. For the initial stage, OJK will regulate insurance marketing through the websites of each insurance company, in the form of a circular (SE), which is currently still being prepared by the regulator.

Deputy Commissioner for Supervision of OJK IKNB Dumoly Pardede said that the issuance of regulations through the SE would not be as strict as the POJK. He said the rules would later contain more guidelines for insurance business actors.

Several points that will be contained in the SE, starting from the identity of the insurance company, product name, type of protection, and the insurance value must be clear.

"Insurers that have fintech are the same as ordinary insurance companies, there is no difference in terms of capital, the conditions are the same. But if digital distribution does not need to be regulated, then there will be a kind of guideline through SE which will include company identity, product name, marketing name," he said when met DailySocial, Wednesday (3/4).

Regulators will also begin to think about the rules of the game for marketing insurance products through other institutions such as fintech that act as aggregators. Dumoly said that currently there are several companies that call themselves digital insurance marketing aggregators, such as PasarPolis, CekAja, CekPremi, and RajaPremi.

OJK's plan was agreed by the Executive Director of the Indonesian General Insurance Association (AAUI) Julian Noor. The association will map out what things need to be considered by regulators before making regulations, what needs to be regulated, and when should rules be issued. The reason is, the association wants to protect two elements, namely consumers and business actors themselves.

"The insurance business is talking about trust, while digital is about marketing channels. These two elements must be maintained. We will assist the regulator in formulating the rules by making a mapping and it is better for the regulator to do it assessment myself," said Julian.

Responding to this, the Pasar Polis said that it would always follow directions from the regulator if there were clear points regarding the clarity of the rules. "We are constantly trying to comply with what regulators want," said CMO PasarPolis Elijah Wijaya.

Security from the association side

Welcoming fintech companies that are predicted to continue to grow, protection is not only from the side of the regulator, but also from related associations as the first layer before obtaining a business license from the regulator.

Moreover, fintech companies, most of which come from startups, are very synonymous with the ups and downs of business. Thus, it is necessary to ensure its commitment when doing business in Indonesia.

From the side of the Indonesian Fintech Association (AFTECH Indonesia), before being registered as a member, business actors are required to go through the following stages: self-assessment based on a questionnaire that has been prepared by the association with one of the multinational management consultants.

"Basically this is to see if the company is a fintech or not assessment, we are also assisted by the consulting company as an independent third party," explained the Director of AFTECH Indonesia M Ajisatria Suleiman to DailySocial.

Aji continued, in compliance, his party also asked the registrant companies to be operational and legal entities, have or are in the process of official regulatory licensing. According to him, if the business activity does not require a permit, it is necessary to provide an explanation along with the reasons.

"We also cooperate with BI and OJK if there are companies that are indicated to be dangerous, for example making fraudulent investments so that they will not be accepted as members."

"Our focus is relations with the government and regulators. If there are those who have not joined, they may not be ready to communicate with the regulators," continued Aji.

Currently, the total members of AFTECH Indonesia are 74 startup companies and 18 financial institutions.