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Maintaining Financial System Stability Through Digitalisation in Indonesia

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Bank Indonesia Governor, Perry Warjiyo, emphasised the need for joint coordination (recover stronger, recover together) to maintain global economic recovery momentum. Indonesia aims to achieve stronger growth together by addressing future issues that are beginning to emerge, such as productivity, digitalisation and the environment.

The importance of an optimal policy approach to normalisation and the scarring effect continues to loom over the global economy. The policy response must narrow the productivity gap by enhancing workforce skills and competencies, supporting the expansion of intangible assets in digital transformation and unlocking access to dynamic markets, such as digital-based industries.

Bank Indonesia addressed the challenges of achieving and maintaining financial system stability, including digitalisation and climate change. In terms of digitalisation, the challenges include inclusive finance and the development of digital currencies. The financial sector plays an essential role in sustaining recovery momentum by absorbing shocks, facilitating the transition towards a green economy, enhancing productivity through new payment methods and disbursing inclusive finance. Furthermore, financial intermediation financial technology (fintech) innovation and climate change issues are the three salient aspects of recovery.

Bank Indonesia encourages collaboration with major players in the payment system, banking and fintech, as well as e-commerce to produce unicorns and new decacorns as part of accelerating the consolidation of the payment system in Indonesia. The presence of unicorns and decacorns is considered to expand the range of payment system services to the public and increase opportunities for business players to develop so that the economy can recover faster and stronger.

Bank Indonesia continues to take steps to integrate the financial system into several fields to produce an increasingly significant economic impact. The central bank has encouraged the collaboration of three important players in this industry, banking, fintech, and e-commerce so that they can synergise their business activities.

Bank Indonesia has started accelerating the payments industry. The bank has released regulatory reforms in this sector, namely how we can consolidate the payment system industry to be able to serve more people. Indonesia wants banking, fintech, and e-commerce to be able to serve the community as a whole.

In addition to accelerating the consolidation of the payment system industry, which consists of banking and fintech, Perry said, Bank Indonesia also carried out two other initiatives to encourage digital payments in an effort to recover the economy, develop integrated payment system infrastructure, support interoperability, and interconnection. Initiatives carried out include the Payment Open API Standard (SNAP), the expansion of 15 million Indonesian Standard Quick Response Code (QRIS) users this year and BIFast.

As reported by OpenGov Asia, OJK recently said that it sought to balance between driving the insurance industry’s growth and safeguarding the consumers, as more insurers embrace digital transformation. Indonesia’s high internet penetration offers a huge opportunity for the insurance industry. Data shows 202.6 million people or about 73.7% of the population in Indonesia are internet users. Around 96.4% or 195 million people surf the internet on their smartphones.

OJK itself has been looking to accelerate the insurance industry’s digital transformation under its 2021-2025 master plan. OJK’s policy direction over the next few years includes strengthening tech-based supervision and consumer protection. OJK will also pursue this balance between growth and consumer protection when regulating insurance technology (insurtech).

OJK will soon roll out the technical regulations on insurtech in hopes of its initial goal, namely making regulations that balance industry needs, contribute to the economy and financial system stability, as well as consumer protection. Customers would enjoy a more streamlined process if insurers embrace technology. Customers can also save costs, with processes becoming much faster and optimum.

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