Government Approach Young Generation to Invest in Retail Bond

Fintech Financing Development, Will It Harms Banking Industry?

Recently the Financial Services Authority (OJK) released some information that the Financial Technology company (Fintech) which focused on peer to peer lending could reach 163 companies by the end of 2018. OJK explained that until March 2018, there are 51 fintech companies registered and got operating license from OJK. 39 companies were still in the process of registration. While 35 companies documents are returned for revision and completing. And 38 companies mentioned that they are interest in developing their business in the Fintech lending platform.

There are increasing in the number of fintech companies is also related to trends and demand in recent years. The number of funders (investors) and borrowers (consumers) have increased 602.73% and 582.37% from December 2016 to December 2017. The amount of loan distributed during this period have also increased 802.32%.

This number could be more increase because until now only 20% of active Internet users who understood the existence of fintech (including the usefulness and advantages) of the whole. Until March 2018, fintech companies has served 146,000 donors and more than 1.03 million borrowers with a total funding of Rp4.47 trillion.

The government has planned to make some regulates about how fintech works, one of them will use principle-based regulation. These principles were to support the Fintech ecosystem development, building the innovation of culture, promoting the capacity building, sustaining business and data security, implementing the effective of risk management, and enhancing of collaboration and achievement.

Competition With Banks
The increased of both of the number of fintech and the fund distributed would make the banks feel abandoned. that’s normal, because three years ago, everything that was increasing from fintech companies still belonged to the banking industry.

But, the fintech companies still argued that they are not competitor for the banks. It is because fintech peer to peer lending target is a middle low community that the majority has not been connected with banking services or unbankable. While middle high community or entrepreneurs are still in touch with the banking industries, because of their comfort and secure system.

Fintech instead seeks to become a financial inclusion agent that provides financing access for the Small Medium Enteprises (UKM) sector that have not been served by financial institutions. Fintech companies have used the technology to reach UKM.

But the banks should also realize that The innovation on the technology is a real threat for their business. learn from the competition between conventional and online transportation in the last few years, five years ago the existence of online transportation was meaningless for the conventional taxi industry. And less than a year, online transportation had became a deadly threat for the taxi industry everywhere.

If they do not want to have the same problem with the conventional taxi companies, bank industry needs to anticipate the worst conditions against the rapid pace of financial technology. They need support to take strategic steps against the situation between banks and fintechs, which is a very sharp competition that has the potential to threaten their existence. The Association of National Bank (Perbanas) advised that the banking industry to be more competitive with fintech.

Instead of competing with fintech, banks would also have to take fintech closer and make strategic cooperation with their technology. and last but not least, the banks need to make efficiency on all lines of their business.

In general, Perbanas considers that the bank’s margin will be drop this year as non-bank financial institutions already provided some features that exactly same with the banks. Their features, one of them is fintech’s, it looks more attractive because they are available, very informative and more efficient that the applications are in the hands of consumers. Indeed, most of features of the non-bank institution are applications on a mobile phone or android. The banking industry will still survive, but still must be able to operate in economic scale.

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