The era of digitization is currently gaining popularity with the term startup. Startup is a company that is just starting or still in the pioneering stage, which generally is engaged in technology and information in cyberspace or the internet. Types of startups can be divided into two, namely e-commerce and financial technology (fintech). In this article the author focuses on the type of Finacial Technology (FinTech).

FinTech can be interpreted as a segment of the startup that has a focus on maximizing the use of technology to change, accelerate or sharpen various aspects of financial services available today, simple examples such as gopay, ovo, tcash, amartha, doku and others etc., but actually there are still many types of fintech. FinTech is the result of a combination of financial services and technology that eventually changes the business model from conventional to moderate, which initially had to pay face to face and bring some cash, now can make long-distance transactions by making payments that can be done in seconds. Bank Indonesia Regulation Number 19/12/PBI/2017 concerning Management of Financial Technology defines Financial Technology is the use of technology in the financial system that produces new products, services, technology and/or business models and can have an impact on monetary stability, financial system stability, and/or payment system efficiency, smoothness, and reliability.

The Management of Financial Technology is categorized into several groups: [1]

  1. payment system. The payment system includes authorization, clearing, final settlement, and payment execution. Examples of the implementation of Financial Technology in the payment system category include the use of blockchain or distributed ledger technology for fund transfers, electronic money, electronic wallets, and mobile payments.
  2. market supporters. Market support is Financial Technology that uses information technology and/or electronic technology to facilitate the provision of faster and cheaper information related to financial products and/or services to the public. Examples of the implementation of Financial Technology in the market support category include the provision of comparative data on information on financial products or services.
  3. investment management and risk management. Examples of the Management of Financial Technology in the category of investment management and risk management include the provision of online investment products and online insurance.
  4. loans, financing and capital supply. Examples of the management of Financial Technology in the categories of lending, financing or funding, and capital raising include peer-to-peer lending services and information technology-based financing or fundraising (crowd-funding).
  5. other financial services. Other financial services are Financial Technology in addition to the payment system category, market support, investment management and risk management, as well as loans, financing, and capital supply.

Some criteria to be considered financial technology are: a. innovative; b. can have an impact on existing financial products, services, technology and / or business models; c. can provide benefits to the community; d. can be widely used; and e. other criteria set by Bank Indonesia.

There are several scopes of arrangements for organizing Financial Technology including: a. Registration; b. Regulatory Sandbox; c. licensing and approval; and D. monitoring and supervision.

The Provider of Financial Technology must be a business entity. [2] Providers of Financial Technology who will or have carried out activities are required to register with Bank Indonesia, except for Payment System Service Providers who have obtained licenses from Bank Indonesia; and/or Providers of Financial Technology which are under the authority of other authorities. Payment System Service Providers who have obtained a license from Bank Indonesia must still submit information to Bank Indonesia regarding new products, services, technology, and/or business models that meet the criteria of Financial Technology, while Financial Technology Providers that are under the authority of other authorities that carry out Financial technology in the payment system field is required to register with Bank Indonesia.[3]

Registration

Registration is done by submitting a written request accompanied by filling and sending the registration form online or if it is not yet available to submit by letter[4] to Bank Indonesia by the authorized party representing the Provider of Financial Technology accompanied by documents in the form of: [5]

  1. a copy of the deed of incorporation of a legal entity or business entity;
  2. ownership data on legal entities or business entities;
  3. list of management composition;
  4. a general description of the company;
  5. a brief description in writing about the products, services, technology provided, and/or business models that are already in operation and / or will be developed; and
  6. other data and information related to Financial Technology activities, examples of data and other information including photocopy of registration and/or licensing evidence from the supervisory authority, distribution of areas related to transactions and users, business potential, volume and value of transactions, market opportunities, and target markets .

Providers of Financial Technology that have been registered with Bank Indonesia must: [6]

  1. apply the principle of consumer protection in accordance with products, services, technology, and/or business models that are carried out;
  2. maintain the confidentiality of data and / or consumer information including data and/or transaction information;
  3. applying risk and prudent management principles;
  4. use rupiah in every transaction made in the territory of the Unitary Republic of Indonesia in accordance with the provisions of the legislation governing currency;
  5. apply the principle of anti-money laundering and prevention of terrorism financing in accordance with the provisions of the legislation governing anti-money laundering and prevention of financing of terrorism; and
  6. comply with other statutory provisions; and
  7. conduct payment systems using virtual currency.

Regulatory Sandbox

Regulatory Sandbox is a safe limited trial space for testing Financial Technology Providers and their products, services, technology and / or business models.[7] Arrangements that can be tested in the Regulatory Sandbox are determined by registered Bank Indonesia.[8] Information and explanations for determination in the Regulatory Sandbox trial are conducted by presenting to Bank Indonesia at least the business model and risk management; and submit complete documents to Bank Indonesia.[9] In the event that the Provider of Financial Technology has made a presentation and the results of the examination of the document are stated to be complete, appropriate, and correct, Bank Indonesia shall stipulate the Provider of Financial Technology along with its products, services, technology, and / or business models for trial in the Regulatory Sandbox. The trial period in the Regulatory Sandbox is set no later than 6 (six) months from the date of Bank Indonesia’s determination of the product, service, technology and / or business model trial scenario. If necessary, the period may be extended 1 (one) time for a maximum period of 6 (six) months.[10]

After going through the Regulatory Sandbox, Bank Indonesia determines the status of the results of the trials of the Provider of Financial Technology in the form of: a. succeed; b. not successful; or c. other status determined by Bank Indonesia. In the event that the trial is declared successful and the product, service, technology, and / or business model includes the Financial Technology payment system category, the Provider of Financial Technology is prohibited from marketing the product, service, technology, and / or business model that is tested before first applying for a license and / or approval in accordance with Bank Indonesia regulations governing the implementation of payment transaction processing.

In the event that the trial is declared unsuccessful and the products, services, technology, and / or business models are included in the Financial Technology payment system category, the Provider of Financial Technology is prohibited from marketing products and / or services and using the technology and / or business model tested.

In terms of products, services, technology, and / or business models including Financial Technology in addition to the payment system category, Bank Indonesia may submit the status of the trial results to the competent authority. [11]

Licensing and Approval

Licensing from Bank Indonesia is required for Providers of Financial Technology that are including the category of Payment System Service Providers.[12] Payment System Service Providers that produce new products, services, technology and / or business models that are: a. development of payment system service activities; and / or b. development of products and / or payment system service activities, but do not meet the criteria as Financial Technology before continuing to market the products and / or services and use the technology and / or business model, must first obtain approval from Bank Indonesia.[13]

Bank Indonesia approval is also needed if there is a Cooperation Services Provider of Payment Systems with a Registered Financial Technology Provider.[14]

Publication and Elimination of Registered Financial Technology Providers

Bank Indonesia publishes the List of Financial Technology Providers on the official website of Bank Indonesia and updates the List of Financial Technology Providers on the official website of Bank Indonesia.[15]

Bank Indonesia may delete a Financial Technology Provider from the List of Financial Technology Providers if:[16]

  1. based on Bank Indonesia monitoring results, products, services, technology, and / or business models are no longer in use by Financial Technology Providers;
  2. The Provider of Financial Technology has obtained a license from Bank Indonesia or the competent authority;
  3. Providers of Financial Technology are subject to sanctions by Bank Indonesia and / or the competent authority;
  4. The Provider of Financial Technology is proven to have committed a crime or was declared bankrupt based on a court decision that has permanent legal force;
  5. there are recommendations and / or written requests from the competent authority;
  6. written request from the Financial Technology Provider; and / or
  7. The Financial Technology Provider submits data and / or information that is not in accordance with the actual conditions.

Monitoring and Supervision

Bank Indonesia monitors Financial Technology Providers with the obligation to submit data and / or information requested by Bank Indonesia.[17]

Bank Indonesia supervises Financial Technology Providers in the form of Payment System Service Providers who have obtained licenses and / or approvals from Bank Indonesia.[18]

 

The existence of fintech in the current technological era continues to increase along with more and more innovative ideas for creating new products through technology. The community now has a great interest in the convenience offered by fintech because activities become more efficient with the services provided by fintech. But on the other hand, it also has an impact on other aspects. For Fintech Providers, they have the obligation to carry out administrative arrangements both from the registration process to monitoring and supervision. This obligation must be fulfilled so that the owned fintech is not legally disputed until it is sanctioned by the state in the form of a business closure or declared as illegal business. For Fintech Users, caution is needed in choosing and using fintech services, because as the number of fintech users increases, reports of criminal acts from the fintech also increase.

Problems are often faced by fintech users such as high loan interest rates, intimidating billing, the borrower’s personal data distribution, to fraud. Not only users who get the threat of loss, it turns out fintech providers were not immune from fraud in this electronic transaction, fintech providers also had to bear losses because users use fraudulent ways to get profits for example consumers who use fake accounts to get promotion vouchers from fintech providers who engaged in payment systems that offer promotions for their customers. Thus the fintech era requires an advocate role for both fintech providers and users. For fintech organizers, Advocates can ensure the required legal compliance and minimize the potential risk of adverse transactions through the legal review function of legal documents that bind the parties to the litigation function if a criminal act occurs. For fintech users, Advocates have a strategic role in fighting for rights and justice if they become victims of illegal finteches and harm the user’s legal interests.

 

[1] Article 3 Bank Indonesia Regulation Number 19/12 / PBI / 2017 concerning Implementation of Financial Technology.

[2] Article 6 Ibid.

[3] Article 5 Ibid.

[4] Article 5 paragraph (4) and (6) Regulation of Members of the Board of Governors Number 19/15 / PADG / 2017 Regarding Procedures for Registration, Submission of Information and Monitoring of Financial Technology Providers.

[5] Article 7 Bank Indonesia Regulation Number 19/12 / PBI / 2017 concerning Implementation of Financial Technology.

[6] Article 8 Ibid.

[7] Article 1 number 4 Ibid.

[8] Article 11 paragraph (3) Ibid.

[9] Article 4 Regulation of the Members of the Board of Governors Number 19/14 / PADG / 2017 Concerning Regulatory Sandboxes for Financial Technology.

[10] Article 11 Ibid.

[11] Article 12 Bank Indonesia Regulation Number 19/12 / PBI / 2017 concerning Implementation of Financial Technology.

[12] Article 15 paragraph (1) Ibid.

[13] Article 15 paragraph (3) Ibid.

[14] Article 18 Ibid.

[15] Article 8 Regulation of Members of the Board of Governors Number 19/15 / PADG / 2017 Regarding Procedures for Registration, Submission of Information and Monitoring of Financial Technology Providers.

[16] Article 9 Ibid.

[17] Article 16 Bank Indonesia Regulation Number 19/12 / PBI / 2017 concerning Implementation of Financial Technology.

[18] Article 17 Ibid.