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Indonesia Encourages Development of Digital Ecosystem in Financial Services Sector

The Financial Services Authority (OJK) seeks to promote the growth of a digital ecosystem in the financial services industry. This is to facilitate the rapid growth of digital commercial and financial activity.

Nurhaida, the Deputy Chairman of the OJK Board of Commissioners, mentioned that “ acceleration is in accordance with consumer trends and that people’s lives are becoming more digitally oriented. Not only that, but the financial services sector’s digitalisation ecosystem will prioritise consumer security and personal data protection to ensure that digital financial services are simple, inexpensive, quick, convenient, and secure.

“The growing digital financial ecosystem is expected to accelerate the pace of digitalisation of the financial industry while increasing financial inclusion for the wider community. In the end, this will be able to realise equitable development and improve people’s welfare,” said Nurhaida.

OJK has established several policies and regulations for the financial services sector to preserve, support, and expand Indonesia’s digital economy, which is based on four primary requirements: being innovative, collaborative, inclusive, and protecting consumer and data protection elements. The Digital Financial Innovation Roadmap and the 2020-2024 Action Plan contain the policies and provisions.

Regulatory and supervisory policies meant to encourage the growth of digital financial innovation in Indonesia are included in this roadmap and action plan. OJK has also established OJK Infinity (OJK Innovation Centre for Digital Financial Technology), which serves as a fintech learning and innovation centre, a platform for coordination and collaboration with key stakeholders, and a regulatory sandbox laboratory.

In November 2021, OJK developed 82 registered digital Financial Innovation (IKD) providers, which are divided into 15 business model clusters. Aggregators, financial advisors, creative credit scoring, insurtech, Insurehub, and wealthtech are examples of these types of companies.

According to the report, OJK has also established technology-based supervision by developing data-based supervisory technology (suptech) and regulatory technology (regtech) in response to the financial services industry’s level of complexity, scale, readiness, and development.

Suptech is the creative application of information technology by authorities or supervisors to improve the efficiency and effectiveness of their tasks. Regtech, on the other hand, is the Financial Services Industry’s creative use of information technology to make reporting compliance duties and regulatory compliance more efficient and effective. Regtech’s primary functions are regulatory monitoring, reporting, and compliance.

OpenGov Asia reported, the Indonesian Government is trying to create a digital ecosystem, which aims to boost potential benefits and mitigate possible risks in the era of disruption, according to a recent press release.

The coordinating minister for Economic Affairs Darmin Nasution explained that the role of the government, monetary authorities, and financial sector authorities is increasingly important in facing the dynamics of digital economic development.

All three are expected to act as regulators, facilitators, and accelerators. The first is maintaining the same level of playing field for all digital economy players. The second is the implementation of enforcement and accountability. Digital surveillance must be clear and accompanied by fair penalties, which would provide a deterrent effect on violators. Violations include the misuse of personal data.

The third is the development of a telecommunications infrastructure project. The Government has already addressed this through the construction of the Palapa Ring, a 36,000-kilometre optic fibre project in the country. The fourth is the creation of policies that support the matching of human resources with the skills required by the industry.

The fifth is to put in place a set of rules that will control unhealthy cross-border trading practices. Mechanisms to monitor and ensure imported products that enter the country via e-commerce are needed. The sixth is economic transformation, which is designed to change the subsistence economic order into an organisation based on added value and competitiveness.

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