Indonesia Takes Lead in Fintech Regulation with Innovative Sandbox
A Regulatory Framework for Digital Financial Innovations
In a move to promote financial innovation while ensuring consumer protection, the Indonesian Financial Services Authority (OJK) has introduced a regulatory sandbox for Digital Financial Innovations (DFI). This innovative framework allows fintech companies to experiment with new financial products and services, as long as they comply with certain regulations.
The DFI Regulatory Sandbox: A Single Mechanism for Communication
The DFI regulatory sandbox was established through Regulation No. 13/POJK.02/2018, which came into effect on August 16, 2018. The regulation categorizes all new digital-based financial activities beyond the already regulated industry as DFI and places them in a regulatory sandbox.
Benefits of the Framework
The move is aimed at:
- Promoting a single mechanism to better communicate with OJK
- Sharing information about testing more effectively
- Improving the application process for firms
- Enabling flexible adaptation to legislative solutions in the fast-changing digital economy while ensuring customer protection
How it Works
Under the framework, fintech companies can submit an application for recording their innovation or business model as stipulated in SEOJK 20/2019. An assigned person-in-charge (PIC) from OJK will then review the application and verify the completeness and accuracy of documents submitted by the firm before determining the status of the firm.
Online Lending: A Success Story
The DFI regulatory sandbox has already seen a surge in online lending, which has previously been plagued by unethical business practices including aggressive collection calls, predatory interest rates, and data privacy violations. The introduction of the sandbox is expected to improve the quality of financial services offered by fintech companies and provide consumers with greater protection.
Quotes
- “Indonesia’s DFI regulatory sandbox is one of the most progressive in the region.” - OJK spokesperson
- “Innovation in financial services is key to driving economic growth and development. We are excited about the opportunities presented by the DFI regulatory sandbox and look forward to working with OJK to promote financial innovation in Indonesia.” - Fintech entrepreneur
Conclusion
The DFI regulatory sandbox has already attracted interest from fintech companies, with many applying for registration under the framework. The move is expected to boost Indonesia’s fintech sector and provide greater access to credit for consumers.
References
- Regulation No. 13/POJK.02/2018
- SEOJK 20/2019