Embracing fintech, Bank Indonesia opens BI Fintech Office

• Fintech needs more support, monitoring and a regulatory sandbox
• Of 120 Indonesian fintech players most are positive about the move

IN A bid to support the recently launched e-commerce roadmap, as well as the growing financial technology (fintech) sector in the country, Indonesia’s central bank, Bank Indonesia (BI) established its own ‘Fintech Office’ last week in Jakarta.

The BI Fintech Office or BI-FTO was inaugurated by Central Bank Governor Agus Martowardojo (pic, above) and will serve as a centre of assessment, risk mitigation, and evaluation of fintech startups’ business model and products, as well as a research and development (R&D) centre for technology-based financial service activities.

“We have seen how Indonesians are getting more attached to their smartphones, and getting used to shopping online, or what is commonly referred as e-commerce. There is no surprise, in the era of instant services, when it comes to payment and transactions, Indonesians wants to have more access and they want it fast.”

“There are high expectations for affordable, faster, easier and reliable financial access, available through an online system, and this is what financial service providers need to give to the people,” Agus said in his speech at the inauguration on Nov 14.

Agus explained that the country has starting to feel the benefits of fintech startups, and therefore there is a greater need to support the innovation fintech startups bring to the table, but at the same time there is also a need for regulators to balance the risk.

Quoting data from Statista, he said that fintech transactions in Indonesia will hit US$14 billion (Rp188 trilllion) by the end of 2016, or 0.6% of global financial transactions which will reach US$2,356 billion by the end of the year.

Categorising fintech and setting up a regulatory sandbox

The first step towards support the fintech industry, according to both BI and the Financial Services Authortity (OJK) is to define fintech and categorise the sector based on its services and products. BI has categorised fintech into four: (1) payment, clearing, settlement, (2) deposit, lending, capital raising, (3) market provisioning, and (4) investment and risk management.

According to BI’s data from 120 fintech startups in Indonesia, 56% of the activities in 2016 fall into Category 1, but Agus said, BI is seeing rapid growth in Category 2 as well.

“We have the responsibility to maintain financial stability in the country. Therefore we need to liaise with the nascent sector and ensure that the products and services offered by fintech players are sustainable and bring great benefit to the population,” Agus continued.

BI’s fintech office will also be equipped with a regulatory sandbox, which will enable fintech startup players to test their products and services. It will also help regulators to understand fintech better and adjust what is needed in the regulation framework.

“We believe that fintech startups and traditional financial institution players can walk side by side to enhance and improve Indonesia’s financial system to support competition and give more value and choice for the people,” he added.

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