Indonesia’s Digital Identity Infrastructure: A Key to Financial Inclusion
As Indonesia continues its digital transformation journey, the need for a robust digital identity infrastructure becomes increasingly urgent. The country’s national ID database is a crucial component in facilitating digital identity and electronic Know Your Customer (e-KYC) transactions at scale.
To accelerate the adoption of e-KYC, the Indonesian government must take concerted measures to build a robust infrastructure for digital identity verification. In this article, we outline six key recommendations for policymakers to ensure seamless integration of e-KYC into the country’s financial ecosystem.
Invest in Infrastructure Development
Indonesia needs to invest resources in developing a cost-effective and device-agnostic authentication infrastructure to enable biometric matching. This requires significant investments, which may need specific budgetary allocations. Countries that have made such investments, such as India, Nigeria, Pakistan, and Singapore, have witnessed significant cost savings in both public and private sectors.
Define Rules of Engagement for the Private Sector
To meet the requirements of a wide range of actors in the Indonesian digital economic landscape, digital identity and e-KYC services must not be subject to discretionary powers of one or two government agencies. The government should make these services available to private players, with a standardized set of rules of engagement that foster a robust, rules-based ecosystem.
Pricing Strategies for Digital Identity Services
Countries have adopted different strategies to price digital identity services. Indonesia can consider a hybrid approach where access is free for public institutions while the private sector is charged nominal amounts for such services. The levied charges provide a consistent source of revenue to maintain and upgrade the infrastructure.
Estimated Pricing Structure for e-KYC Services in Indonesia
- Authentication service: IDR 400-800 (USD 0.03-0.05) per query
- E-KYC: IDR 4,000-7,000 (USD 0.28–0.47)
Protect Customer Data with a Defined Policy Framework
Indonesia needs to establish a personal data protection law to ensure that proposed verification services strictly adhere to the mandated data protection protocols of the country. This would mitigate risks related to the abuse of personal data and increase confidence among policymakers and consumers.
Other Recommendations for Policymakers
- Define standardized set of requirements for different levels of verification services
- Establish a clear framework for data sharing and protection
- Develop a comprehensive plan for infrastructure development and maintenance
- Ensure seamless integration with existing financial systems
In conclusion, the development of a robust digital identity infrastructure is crucial to Indonesia’s financial inclusion goals. By implementing these recommendations, the country can ensure a secure, efficient, and cost-effective e-KYC system that benefits both consumers and businesses alike.