Financial Crime World

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Digital Identity Theft Prevention: A Must for Indonesia’s Growing Digital Economy

March 10, 2020

As Indonesia continues to undergo a digital transformation, with many digital businesses booming in the finance sector, the nation faces a growing threat of identity theft. A recent surge in online lending has led to exponential growth, but this progress is being hindered by rampant identity theft issues.

The Rise of Online Lending and Identity Theft

  • The country’s online lending industry has witnessed 30X growth in loan disbursements over a two-year period between 2017 and 2019.
  • However, the sustainability and scalability of this phenomenon are being threatened by the lack of digital trust.

The Problem of Digital Trust

Fraudsters are taking advantage of the nascent nature of Indonesia’s digital economy, exploiting limited awareness about identity fraud amongst citizens. In most cases, fraudsters use unsuspecting consumers’ identity information to obtain loans and credits, leaving victims burdened with millions of Rupiahs in debt and lenders with non-performing assets (NPAs) as high as 40%. The lack of digital trust stems from the absence of a robust mechanism for digital identity verification and analytics.

Solving the Problem: Three Key Pillars

To address this issue, it is essential that platforms emerge that enable online verification of consumer identity without requiring document submission and accurately analyze creditworthiness based on digital footprints. The following are three key pillars that can fill this gap in digital trust:

  1. Centralized Data Repository: A centralized data repository incorporating identity attributes can provide a single source of truth for verifying customer identities.
  2. Leveraging Telecom Data: Leveraging telecom data, such as mobile number and SIM card information, can help to verify customer identities and detect fraud.
  3. Consumer Consent: Obtaining consumer consent is crucial in ensuring that customers are aware of how their data is being used and can opt-out if they wish.

The Importance of Partnering with Organizations

While Indonesia’s progress towards a digital economy is crucial, it must be achieved with the right measures in place. Data plays a vital role in ensuring success, and partnering with organizations that have the necessary capabilities and track record is essential.

Preventing Digital Identity Theft

To prevent digital identity theft, Indonesia should leverage alternate sources of data for identity verification to enhance customer experience. This will not only protect consumers but also support the nation’s vision of narrowing the USD 70 billion credit gap.

About the Author

Upal Pradhan is a tech entrepreneur with over 12 years of experience in digital media, telecom, fintech, adtech, and market research. He holds a management degree from IIT Kharagpur and a bachelor’s degree in engineering from IIEST Shibpur. He currently heads Business Development at IDcentral, a Subex company.