It’s Time to Get to Know the New Regulation of Fintech Indonesia!

It’s Time to Get to Know the New Regulation of Fintech Indonesia!

New regulation of Fintech Indonesia is highly associated with the establishment of the service of payment system as well as transaction.


Not only do agriculture and medical sectors undergo the significant progress of technology, from air and soil sensors to needle-free diabetes care, but the finance world appears to be something inexpugnable. Have you ever heard the Fintech?



The term standing for Financial Technology is a brand-new innovation in finance area that perfectly combines both information technology and financial service. Emerging brilliantly as a major breakthrough in recent times, it successfully lifts the sophistication in business to the upper level.



With reference to the speech of the latest Indonesian deputy finance minister, Fintech has brought out some positive impacts to the public. Although the elevated technology innovation might come with a multitude of risks like data breach and fraud, it always becomes the limelight of today’s people.



Apart from the stunning factor of Fintech rapidly growing in this day and age, we will see how the new regulation of Fintech Indonesia runs in the newly industrialized nation with a vast market.





How Fintech is Regulated in Indonesia; is There Anything Fresh concerning It?

Since the presence of the Indonesian Fintech is categorized as something recently developed, the local administration begins arranging regulation in regard to it.



Despite the fact that Fintech is not in the perspective of Indonesian law – we mean it’s not particularly cited in the enactment, it has already managed in OJK standing for Otoritas Jasa Keuangan (the literal meaning is financial services authority), BI (Indonesian Bank) and the same is true with the Ministry of Communication and Informatics. Even though the legal entities has no immediate relation to the government, their legal standing is quite firm.



As an institution having an authority to regulate and supervise the activity of financial services either in the bank or outside of it, it surely requires a precept. The objective of making the regulation is, at the bottom, to ensure that the people behind the loan service and peer to peer lending obey a couple of conditions.



Additionally and the most important of all, it is to protect all of the customers from any possible threat. Some severe cases including money laundering, funding for terrorism act, customers’ personal information theft could be more terrifying unless the precise rule is carefully compiled.



We definitely understand that the finance area is overly vulnerable. Many specifically irresponsible ones are prone to abuse it. That’s why a regulation named POJK number 77/POJK.1/2016 is eventually made. This sort of stipulation controls the limit of share ownership, maximum limits of the loan as well as interest.



It also vigilantly regulates the minimum capital, a basic requirement in the making of an escrow account (a legal agreement dealing with valuables particularly money kept by a third party called an escrow agent), and not to mention numerous principles applied by the providers of Fintech.



The rule issued by the Indonesian Bank or BI is another thought to take into account. It is popularly known as PBI (Peraturan Bank Indonesia or regulation of Indonesian Bank) number 18/40/PBI/2016. Why it exists is not questioned. It basically has an aim to cater to the public so that their need in cash or things related to financial service is fulfilled.



The regard embraces the system of payment service covering the instrument of it, mechanism and details, transaction process, and the organizers of Fintech as well. This sort of rule can be accessed by way of the official site of Indonesian Bank named



In addition to the legal provision issued by the Indonesian Bank, the existence of Indonesian Fintech is strengthened through PBI number 19/12/PBI/2017. Unlike the first sort arranging the technical detail in payment, it is issued to stabilize the Indonesian monetary system.



Once this act is successfully made, the customers are capable of benefitting an efficient payment system with full safety and convenience. It also shares its major contribution over the national economic growth making it more sustainable and inclusive as well.



When it comes to e-money services, the Indonesian Bank (BI) creates an enactment called PBI (BI regulation) number 11/12/PBI/2009 on electronic money. Aside from it, the amendment the regulation of Indonesian Bank number 11/11/PBI/2009 in regard to the administration of cards as payment instruments is such true evidence that Fintech is under careful supervision.



The sorts of rules arrange a couple of points such as forms of corporate, secure technology and the management of risk, as well as license and transfer of license.





A Variety of Businesses Actively Getting Involved in Indonesian Fintech

The economic growth of the tropical country, flanked by two oceans, flourishes well. This truth has uncovered a number of opportunities for the business people from all around the world to do the company expansion. Out of whole sectors, finance and technology remain spotted by varied elements of the society.



Although the industry of Indonesian Fintech is not as fast as Japan or Korea, its growth significantly increases. The peak of this type of industrial sector takes place in the period between 2015 and 2016.



Some of you might go with a query clarifying what sort of finance businesses that get involved in Fintech industry in Indonesia. According to a credible source from the internet, there are around 200 Fintech companies that actively do their operation in the archipelago.



The sub-sectors include investment, peer-to-peer lending, payment varying in numerous forms, and not to mention blockchain and insurance application. However, the majority of financial sectors, reaching up to 50 percent, referring to the payment system operator. The appearance of it comes with no surprise since it is in accordance with the growth of Indonesian e-commerce.



In comparison to other countries belonging to the developed class, Indonesia doesn’t have any indication of particular attention on the high-tech innovation. The industry of Indonesian Fintech tends to be filled with the application of technology that is relatively simpler.



It sounds practical than theoretical. With the creative method intensely used, the regular problem taking place based on the daily basis can be reassured as well as settled. The interesting part of the Fintech industry that the nation has to offer is its close relation to the development of an agricultural business. Do you know either Tanifund or iGrow? These two terms are basically the outcome of it.





Do those Fintech Businesses Find Some Restriction according to Some Common Regulations?

The new regulation of Fintech Indonesia that refers to the stipulation of PBI number 18 the year of 2016 on the processing operation of payment transaction shows that there is a prohibition of making use of virtual currency whilst processing the payment transaction.



The provision in regard to limitation is also strongly added by PBI (Indonesian bank’s regulation) number 19/12/PBI/2017 with reference to the implementation of financial technology. The rule, fresh from the oven, can be a legal reference to suing the industries allegedly breaking the law.



How about the sanction? Is there any clarification about this matter? Under the new ordinance, those who stick out in using the virtual currency while doing the transaction, the related party will gain a couple of administrative sanctions inflicting a financial loss.



They could be fined and their activities providing financial service to the public are subject to suspension. In the worse case, their Fintech license is revoked.  The truth that the ban on some Indonesian bitcoin platforms making them closed down should be an alert for the rests.




The Available Funding for Fresh Businesses in Indonesia

Generally speaking, there are two types of funding obtainable in Indonesia – debt-based and equity funding. A sum of money is highly needed to support the business. The curbed number of sponsoring factors is first, due to the condition of Indonesian debt market likely less developed and secondly, the quantity of bond issuance relatively near to the ground.



It takes much effort to go for fundraising when it comes to growing a new business particularly the Fintech. Why it happens is simply because of the tight requirements. Instead of doing it, some of the finance-based corporations use mergers and acquisitions.


What about the schemes of special incentives provided for the Indonesian Fintech industry? Regrettably, the local administration has yet to release any schemes regarding the special incentives for the further enterprise investment. Despite so, the coordinating ministry of the economic affair of Indonesia has a brilliant project i.e. launching a fiscal incentive.



This fresh news, for sure, brings out something great among the Indonesian Fintech businesses. Surprisingly, the related assistant of the government will seriously realize this plan by working together with the doctorate general of taxation.





Have the Policy Makers Satisfied the Indonesian Fintech Market?

With reference to a reliable survey successfully conducted in 2017, it indicates that two leading regulatory bodies that double as both policy makers and financial regulators (OJK and BI) have meaningful work. The regulatory concerning Fintech keeps improving in the recent time.



The policies made are considered beneficial, full of positive values, to the development of Fintech in the country. One of the key regulatory bodies, the Indonesian Bank, elevates the quality of service in term of payment system by issuing a precise regulatory frame. It doesn’t stop there; it also regulates the development of Fintech office for BI and the regulation on sandbox.



Although OJK has a dissimilar section in the services of Fintech, the role of the financial regulator can’t be underrated.  Its achievement apparently looks that seamless. For instance, OKJ successfully releases a provision about peer-to-peer (P2P) platform.



With this mean, the customers and business person in Fintech can have a smooth interaction. The following official order immediately issued in the near future includes contract guidelines and KYC (Know Your Customer) online feature.



Another breakthrough carried out by the Indonesian policy maker which is the Ministry of Communication and Informatics is nothing else but the National Identification Verification System or Sivion. The initial move is basically a useful platform allowing the public to do the digital signature.



This one indicates that the administration has big concern against the operation of Fintech industry. In relation to the sector of infrastructure, this active ministry invents the network construction project of fiber optic at the national level. This program will wishfully be completed in 2019.




How Can Foreigners Participate in Indonesian Fintech Business?

Is this Fintech industry only eligible for Indonesian citizens? It is definitely not. As a matter of fact, foreigners are able to share their contribution to bringing forward the existence of Indonesian Fintech. In spite of it, you have to understand that foreign workers are highly watched by the local administration. In accordance with the latest capital investment regulation, abroad companies wishing to play a part in the sector of financial service are required to develop a PT (Perseroan Terbatas).



Presently, the Indonesian Bank sets a regulation in regard to the foreign people’s participation in the payment service. It specifies that the percentage of them is no more than 20 percent. The spots in order for the foreigners occupy include principal, clearing operator, operator of switching, and not to mention the final settlement operator. When it comes to the share, the individuals from overseas are subjected to the limitation in the ownership of peer to peer service. It states that they are only accessible to the maximum share of 85 percent.



How does the procedure to join in the Indonesian Fintech business of foreign workers go? Starting a business in Indonesia, certainly, needs to meet some requirements. The foreigners, planning to open their Fintech firm, are in need of operational license obtainable from the authority of finance (it can be either OJK or BI).



Before getting this, make sure that you understand what type of sub-sector you are going to manage. Both finance policy makers have their own capacity, differing from each other.



What about other sorts of requirements need for the foreign workers?  Besides the license of operation, they must gain the basic permits (these ones cover fiscal and non-fiscal). The important thing to note, before acquiring the early requirement, is the Fintech firm should file a registration of investment to a legal body namely BPKM. This term refers to the Capital Investment Coordinating Board. The fulfillment condition is already set in the regulation of BPKM number 13 the year of 2017.




Other Regulated Things to Think about

Are there any technical details that deserve to mull over other than the finance regulation? Sure, there are some considerations that can’t be apart. Technically, the presence of Fintech is closely connected to the transmission of data or the collection of it.



How the information and facts are transferred is precisely regulated on the Law number 11 the year of 2008 concerning electronic information and transaction. The further implementation of this law is specified in GR 82/2012 and not to mention in the newest law of Ministry of Communication and Informatics number 20 the year of 2016 on the subject of the protection of personal data in an electronic system. Nowadays, it’s commonly called the EIT law.



Speaking of the EIT law, it mainly focuses on how the electronic system operator is organized. Some might come with no idea with the definition of it. To shed light on it, the term alludes to those who supply a service of an electronic system to the users.



Despite the fact that Fintech is not mentioned palpably, still, it belongs to the operator of the electronic system. On the whole, the related party must hold in high regard for the customer’s privacy particularly the personal data. The operator also should ensure that all of the data is secured and treated as something confidential.



As stated by the rule, all of the operators of the electronic system should come with the clear internal procedure highlighting the completion of personal data protection so that the protection failure can be deeply anticipated. The perspective of the public that mostly concerns the customers’ safety needs to be heard.



They must be in the same mind that the people (especially working in the online area) should ask permission i.e. a written letter to the data owner. Be it collecting or publishing the personal data, an approval is nothing but a must.



To add the previous opinion in regard to requesting the consent from the data owner, it is also essential to let the center of data as well as disaster recovery stored within the territory of Indonesia.  Here is the worst case, if some data leak or are stolen by irresponsible parties unknown, the nation’s resilience must be in a serious threat.



Besides, it will bring out an array of negative impacts to the political situation. For this reason, the people have nothing more to do other than minding this piece of advice.  In short, confidentiality in keeping vital information literally affects the country’s existence.



To make a long story short, new regulation of Fintech Indonesia basically encompasses the better service of the payment system and transaction through online approach with the incredible values like e-commerce does, peer-to-peer lending, and some innovative inventions in the field of finance. They can’t be apart from the role of regulatory bodies including BI, OJK, and the Ministry of Communication and Informatics.



SMART Consulting is an Indonesian Corporate Legal Services firm. SMART has assisted Clients in dealing with matters related to Investment Law, such as assist Client to establish Foreign Direct Investment Company and Representative Office. We also assist Clients regarding the Compliance and Corporate Legal Services.



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