Financial Technology – Indonesia

SSEK Law Firm partner Winnie Yamashita Rolindrawan provides an in-depth overview of the fast-evolving fintech sector in Indonesia, including the licensing and marketing of fintech companies, in The Financial Technology Law Review.

Fintech companies in Indonesia are regulated by Bank Indonesia (BI) and the Financial Services Authority (OJK), with each having its own scope of authority. L aw No. 4 of 2023 regarding the development and strengthening of the financial sector (P2SK Law) defines technology innovation in the financial sector to include activities such as payment systems, capital raising, investment management, risk management, cryptocurrencies, and other digital financial services and activities. The OJK regulates fintech activities related to financial services, whereas BI regulates fintech activities related to payment systems.

The OJK has put in place provisions and extensive criteria for regulated fintech activities related to financial services, which are regulated under OJK Regulation No. 13/POJK.02/2018 regarding digital financial innovation in the financial services sector, dated 16 August 2018 (OJK Reg 13). These criteria include being innovative in nature and future-oriented, using information and communications technology as the primary basis for providing financial services to consumers, and supporting financial inclusion and literacy.

Providers that meet these criteria are required to register with the financial regulatory bodies. Companies engaged in digital financial innovation in the financial services sector are also required to register or obtain a licence, unless otherwise exempted.

Fintech activities related to payment systems

BI regulates fintech activities related to payment systems under various regulations, including BI Regulation No. 22/23/PBI/2020 regarding payment systems, dated 30 December 2020 (BI Reg 22), BI Regulation No. 23/6/PBI/2021 regarding payment service providers, dated 1 July 2021 (BI Reg 23/6), and BI Regulation No. 23/7/PBI/2021 regarding payment system infrastructure providers, dated 1 July 2021 (BI Reg 23/7). The regulation of fintech companies by BI is also explicitly addressed in the P2SK Law, with payment systems included as one of the activities of technology innovation in the financial sector. New implementing regulations on this matter are expected.

No specific regulations in Indonesia currently govern the marketing measures that fintech companies can undertake, but companies must comply with general regulations governing advertising and promotion. Fintech companies should also ensure that their marketing practices comply with recently issued regulations on consumer protection in the financial services sector.

Artificial intelligence

Even though there is no specific law or regulation in Indonesia for automated digital advisory services, investment management and market support activities that use artificial intelligence (AI), machine learning, big data and other technologies fall under technology innovation in the financial sector. Companies providing these services must comply with sandbox mechanisms under the P2SK Law and OJK Reg 13.

Any party that wishes to establish an asset management company in Indonesia must refer to the activities of an investment manager (IM) company operating on the Indonesia Stock Exchange pursuant to Law No. 8 of 1995 regarding capital markets, dated 10 November 1995, as amended by the P2SK Law (the Capital Market Law). Other than the requirement for the company to be established in the form of an Indonesian limited liability company (PT), the company must also be registered as a securities company, specifically as an IM company, for which a licence must be obtained from the OJK, pursuant to the Capital Market Law.

Credit information services

Credit information services are regulated in OJK Regulation No. 5/POJK.03/2022 regarding credit information management agencies, dated 28 March 2022, and OJK Circular Letter No. 27/SEOJK.03/2022 regarding credit information management agencies, dated 22 December 2022. Under these regulations, a credit bureau is referred to as Credit Information Management Institution that collects and processes credit or financing data and other data to produce credit information, and they must obtain a business licence from the OJK.

Excerpted from The Financial Technology Law Review, published by Law Business Research Ltd.

Find The Financial Technology Law Review: Indonesia here.

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