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By : Dewi Susanti, S.H., M.KN.
The financial sector is continuously coming up with new and more efficient ways to provide services to the global population. The application of financial technology (FinTech) in the financial industry is improving accessibility to financial services.
FinTech Lending is bridging the gap caused by limited access to banks between the public and the banking sector. People no longer need to go through a complicated process to obtain a loan. FinTech is a dynamic segment at the intersection of the financial services and technology sectors where technology-focused start-ups and new market entrants have created more efficient products and services currently provided by the traditional and once untouchable financial services industry. FinTech is gaining significant momentum and disrupting the traditional value chain of financial institutions and the economic status quo in many countries and markets. Cutting-edge FinTech companies and new market activities are redrawing the competitive landscape, blurring the lines that once defined players in the financial services and banking industry.
The advent of FinTech has created new ways to access and use financial tools and services at a reasonable cost. Examples of fintech developments that have increasingly been embraced by financial users include crowdfunding, robo-advisors, digital payments, peer-to-peer (P2P) or social lending and insurance telematics. While these innovative services have disrupted the financial world by bringing in more participants into the financial sector, there is still an untapped portion of the world’s population that remains outside the financial sector.
There is a sizeable global market opportunity for FinTech. However, many citizens are not included in the banking system and have a deep mistrust of financial institutions and prefer to conduct all-cash transactions. To meet this challenge, FinTech companies have come up with innovations that promote transparency in their dealings with customers. P2P lending is particularly beneficial to people in emerging markets who have no way of getting loans from financial institutions as a result of a lack of financial history and credit record.
Promulgation of FinTech regulations is an urgent need, and the regulator's supervision is necessary to ensure user protection, organization of FinTech and protection of national interests in order to increase financial inclusion. In Indonesia, the statutory rules for the FinTech industry are set out in Regulation of the Financial Services Authority (Otoritas Jasa Keuangan/OJK) Number 77/POJK.01/2016, concerning Lending and Borrowing Services Using Information Technology. This regulation contains OJK provisions to minimize credit risk, protection of the interests of users from dangers, such as the misappropriation of funds and data user information and protection of national interests such as anti-money laundering activities and terrorism funding prevention as well as threats to the stability of the financial system. The OJK requires FinTech providers to apply “Know Your Customer” (KYC) principles, which are already in force in the traditional financial sector.