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Bank Indonesia Introduces New Category Three Permits for FinTech Operators

Jakarta, Indonesia - In a move to encourage innovation and growth in the digital economy, Bank Indonesia has introduced new category three permits for Financial Technology (FinTech) operators. The permits cover activities such as remittance services and others determined by Bank Indonesia.

Requirements for FinTech Operators

To obtain these permits, FinTech operators must meet certain requirements, including:

  • Institution legality
  • Ownership, control, and management
  • Strong risk management practices, including:
    • Legal risk
    • Operational risk
    • Liquidity risk
  • Robust information system capabilities, including:
    • Security control procedures
    • Fraud management systems
    • Regular audits

Trial Period for Payment System Innovations

Bank Indonesia has established a trial period for payment system innovations aimed at encouraging technological innovation and monitoring the opportunities and risks of such innovations on the development of the digital economy and financial ecosystem. The trial period consists of three components:

Components of the Trial Period

  • Innovation Lab: Allows FinTech operators to develop new innovations that have not been used or have been used on a limited basis in the payment system industry.
  • Regulatory Sandbox: Enables testing of innovative payment system policies or provisions.
  • Industrial Sandbox: Facilitates testing of innovations that are already being used in the payment system industry but need encouragement to become widely used.

Successful Trial Period

If the trial period is deemed successful, FinTech operators may be granted a permit and/or approval to operate their product, activity, service, or business model. However, if the trial period is unsuccessful, the product, activity, service, or business model must be modified or discontinued.

Supervision of Payment Systems

Bank Indonesia supervises the implementation of payment systems using a risk-based and compliance approach aimed at creating fast, easy, cheap, safe, and reliable payment systems that encourage innovation while adhering to international standards and practices. The supervision involves:

  • Indirect Supervision: Monitoring reports, data, and information obtained by Bank Indonesia.
  • Direct Supervision: Periodic inspections at FinTech operators’ premises.

Potential Abuse of Digital Payments for Financial Crime

The Indonesian Financial Transaction Reports and Analysis Center (PPATK) has reported an increase in suspicious financial transaction reports during the COVID-19 pandemic. The reports cover various crimes, including corruption, fraud, online gambling, tax crimes, and manipulation of capital markets.

Preventing Potential Abuse

This situation requires serious attention from the government and Bank Indonesia to prevent potential abuse of digital payments for financial crime. The bank must support the application of the precautionary principle to protect payment system operators and users from various risks that may arise, while also ensuring economic stability and the integrity of the financial system.