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Indonesia Government Launches Blueprint to Support Digital Banking Transformation

The Financial Services Authority (Otoritas Jasa Keuangan, OJK) is currently working on a blueprint for banking digital transformation that will guide the development of banking digitalisation for the country. This blueprint will serve as a policy response to the various challenges and risks associated with banking digital transformation. The blueprint for digital banking transformation, according to OJK Deputy Commissioner for Banking Supervision, is said to be a more detailed description of the acceleration of digital transformation in the Indonesian banking development roadmap. OJK will soon release this blueprint for digital banking transformation.

The fintech industry was still afflicted by a slew of digital issues, including fraud, information hacking via the sniffing method, and money mule schemes in which perpetrators ask victims to transfer money to someone else’s account. The ministry has proposed precautionary measures to ensure that the fintech industry grows in tandem with the bolstering of Indonesia’s digital economy ecosystem.

This cybersecurity risk management is prepared by referring to the international standards and best practices from various countries.

– Deputy Commissioner for Banking Supervision of the Financial Services Authority

OpenGov Asia in an article reported that the Minister of Communication and Informatics believes that the financial technology sector, or fintech, can be a driving force in the growth of Indonesia’s digital economy. He noted that the opportunities of fintech are determined by the reach and amount of funding available.

Fintech lending services reached 27.2 million people, or 10% of the population, in August of this year, according to the Ministry of Communication and Informatics. Furthermore, the sector lent Rp14.95 trillion last year, making Indonesia the second most successful ASEAN country in terms of attracting fintech investment, after Malaysia, Singapore, Thailand, and Vietnam.

“Some of the policies that will be outlined in this blueprint include data protection and data transfer principles, data governance policies, as well as information technology governance and architecture policies, cyber security policies that refer to international standards, outsourcing policies, and bank cooperation standards with third parties, as well as the direction of institutional arrangements that support digital transformation,” said the Deputy Commissioner for Banking Supervision at the 2021 OJK Virtual Innovation Day held today.

In addition, the Deputy Commissioner for Banking Supervision stated that to further ensure and enhance the banking industry’s resilience to cyber security risks, OJK has developed a framework for strengthening cyber security risk management for commercial banks to supplement information technology risk management for commercial banks.

The Chairman of the Board of Commissioners of the Financial Services Authority also noted that OJK is continuing to accelerate digital transformation in the financial services sector by leveraging the potential of Indonesia’s rapidly growing digital economy.

Furthermore, the OJK’s policies for accelerating digital transformation in the financial sector are focused on two things: first, encouraging the use of digital technology to provide low-cost and competitive product services to the public. Second, to make it easier and more convenient for unbanked and MSME actors to enter the digital ecosystem.

Increasing coordination with relevant law enforcement agencies, among other things, to ensure the security of consumer personal data. “Personal data security risks and cybersecurity risks are the main focus of OJK through coordination with all law enforcers, if there is misuse or practises that are not in accordance with the rules,” added the Chairman of the Board of Commissioners of the Financial Services Authority (OJK).

Ultimately, the Financial Services Authority (OJK) will also work to improve the financial inclusion index and digital financial literacy. This is to address the challenges of knowledge gaps and low public awareness of digital financial products and services. The OJK’s efforts to close this gap include collaboration with the Asian Development Bank (ADB) in compiling a Fintech book and developing a digital financial literacy programme module on Peer-to-Peer Lending, which will be launched soon and supported by the World Bank.

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