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Fintech Regulation in Indonesia: A Framework for Digital Financial Innovations

Regulatory Sandbox and Key Objectives

The Financial Services Authority (OJK) plays a crucial role in regulating digital financial innovations (DFIs) in Indonesia. To promote innovation while ensuring customer protection, OJK introduced a regulatory sandbox framework. The objectives of the POJK 13 are to:

Promote a single mechanism for communicating with OJK
Improve information sharing about testing
Enhance the application process for firms
Enable flexible adaptation to legislative solutions in the new digital economy

Circular Letters and Regulatory Framework

OJK issued three Circular Letters (SEOJK) regarding DFI based on the mandate of POJK 13/2018:

SEOJK No. 20/SEOJK.02/2019: Recordation Mechanism for DFI

Establishes a recordation mechanism for DFIs
Requires firms to submit an application for recording their innovation or business model

SEOJK No. 21/SEOJK.02/2019: Regulatory Sandbox

Introduces the regulatory sandbox framework
Allows DFIs to experiment with innovative financial products or services while complying with certain regulations

SEOJK No. 22/SEOJK.02/2019: Appointment of DFI Organizing Association

Requires firms to appoint an organizing association for their DFI business

Application Process and Verification

Before entering the sandbox, each DFI must submit an application for recording their innovation or business model as stipulated in SEOJK 20/2019. OJK will then verify the completeness and accuracy of documents submitted by the firm and review the application before determining the status of the firm.

The regulatory framework aims to promote innovation while ensuring customer protection, which is a key aspect of fintech regulation.