FinTech Boot Camp for Regulators2016-12-08 13:48:33
The number of FinTech startup companies in Indonesia is increasing steadily. In the last two months alone, the number of FinTech groups registered with the Financial Services Authority (OJK) has grown from 120 to 160. The companies aim to offer services including insurance, investment, financing, peer-to-peer lending, and crowd funding.
FinTech refers to technology-based businesses in the financial space that compete, enable or collaborate with formal financial institutions. Around the world, FinTech companies are rapidly expanding lending, payments and other supporting services for finance, including hedging, big data analytics, and credit scoring.
FinTech has major potential to grow the Indonesian economy and financial sector. The challenge for regulators is to strike the right balance between financial sector growth, prudent supervision and consumer protection. As reported in a previous article, AIPEG is supporting OJK investigate FinTech regulations with a view to OJK releasing a new regulation this year.
During November 2016, AIPEG supported OJK officials to participate in the Mekong Business Initiative FinTech Regulatory Boot Camp in Singapore. Funded by the Australian Government through the DFAT ASEAN Regional Office together with the Asian Development Bank, the Mekong Business Initiative aims to catalyse private sector-led business innovation and growth.
The objectives of the Boot Camp were to understand the potential impact on financial inclusion of emerging financial technologies, share information and experiences about emerging approaches to regulation of FinTech, and create a working group of regional regulators and FinTech practitioners that can share experiences and provide mutual support going forward.
Officials from OJK noted that regulatory bodies around the world have tried to manage risks while maximising FinTech’s potential. For example, the Government Partnerships Fund (GPF) agency, the Australian Securities and Investment Commission (ASIC), has granted licences (financial services and credit), released guidance on digital advice and marketplace lending, and consulted on ‘sandbox’ regulatory exemptions (effectively a safe and contained place to experiment with FinTech products).
In the first stage, OJK will focus on regulating FinTech in the lending area as this is considered to have most potential to push economic growth further and faster. This would include Peer to Peer lending (P2P) – a digital platform that brings together lenders and borrowers (mostly small and medium-sized enterprises and individuals). It is hoped that P2P lending can contribute to greater financial inclusion, matched by sound regulation to promote a healthy business ecosystem.