Fintech in Indonesia – Financial Regulation

Fintech products and services in Indonesia are mainly regulated by two government bodies, Bank Indonesia and the Financial Services Authority (OJK).

Bank Indonesia Regulation No. 19/12/PBI/2017 regarding the Organization of Financial Technology, dated 30 November 2017, regulates fintech activities that require licensing or registration in relation to monetary stability, financial system stability and payment systems, as follows:

• payment system activities, including authorization, clearing, final settlement and implementation of payment; for example, blockchain or distributed ledgers for the provision of fund transfers, electronic money, electronic wallet and mobile payments;
• market support (ie, activities that use information or electronic technology, or both, to facilitate the faster and more cost-efficient provision of information to the public on financial products and services; for example, the provision of information comparing available products or services in the financial services area);
• investment management and risk management for the provision of online investment and online insurance, among others; and
• lending, financing or funding and capital raising including peer-to-peer lending or information technology-based fundraising (crowdfunding).

Digital financial innovation, commonly referred to as fintech, is regulated from a financial services perspective under OJK Regulation No. 13/POJK.02/2018, dated 16 August 2018, regarding Digital Financial Innovation in the Financial Services Sector. This regulation covers:

• transaction settlement: this focuses on, among other things, investment settlement;
• capital raising, such as equity crowdfunding, virtual exchange, smart contracts and alternative due diligence;
• investment management; for example, advance algorithms, cloud computing, capability sharing, open source information technology, automated advice and management, social trading and retail algorithmic trading;
• fundraising and fund disbursement: this includes activities such as peer-to-peer lending, alternative adjudication and third-party application programming interface;
• provision of insurance; for example, sharing economy, autonomous vehicles, digital distribution and securitization and hedge funds;
• market support; for example, artificial intelligence or machine learning, machine readable news, big data, social sentiment, market information platforms and automated data collection and analysis;
• other digital finance supporting activities, such as social and eco-crowdfunding, Islamic digital financing, e-waqf, e-zakat, robo-advisers and credit scoring; and
• other financial services activities; for example, invoice trading, vouchers and products using blockchain-based applications.

The Indonesian government fairly recently issued Government Regulation No. 80 of 2019 regarding Trade Through Electronic Systems, dated 25 November 2019 (GR 80/2019). It then issued Minister of Trade (MOT) Regulation No. 50 of 2020 regarding Provisions on Business Licensing, Advertisements, Guidance and Supervision of Business

Practitioners in Trade Through Electronic System, dated 19 May 2020 as an implementing regulation for GR 80/2019. These regulations impose new obligations for organizers of trade through electronic systems (PPMSE), which is any business practitioner that provides electronic communication facilities used in trade transactions.

A PPMSE operating from outside Indonesia and that fulfils certain criteria is now required to appoint a representative in Indonesia and, consequently, must have a foreign trade company representative office in the country. PPMSE that have completed transactions with more than 1,000 consumers in a year or have delivered more than 1,000 packages to consumers in a year, or both, are required to appoint a representative in Indonesia.

This first appeared in Lexology GTDT Fintech 2021.

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