Urgency of financial technology (Fintech) laws in Indonesia

This paper aims to elaborate the reasons why Indonesia needs Law on Fintech. This paper also identifies the flaws in the existing regulations and policies on Fintech, and it also proposes an ideal framework for a fintech law as a strategy to strengthen consumer protection and to accelerate the growth of the digital economy in Indonesia.

This is normative research with a legal approach. Data were collected through a literature study and analyzed using legal norm method.

The promising potential and growth of the fintech industry in Indonesia need to be supported by a sound legal framework in the form of Indonesian Law. In regards to fintech, Indonesia does not yet have a specific law on fintech. Existing regulations in the Bank of Indonesia Regulations (PBI) and Indonesia Financial Services Authority Regulations (POJK) only regulate the technical aspects of the industry, thus providing a less sound legal power. Bank of Indonesia (BI) and Indonesia Financial Services Authority (OJK) have limited authority in the making of regulations and the regulations produced by these institutions cannot stipulate criminal provisions. This results in inadequate consumer protection measures. The Investment Alert Task Force reported 2,018 illegal P2P lending, 472 illegal investment companies and 69 illegal pawnbrokers. The accumulation of online lending transactions in December 2019 reached a total of IDR81.50tn, seeing a 259.56% increase from the previous year. Meanwhile, the amount of bad debt reached IDR13.6tn, seeing a 169.48% increase. These reasons illustrate how urgently Indonesia needs Fintech Law.

This research only examines the existing Fintech regulations in Indonesia. The approach method used is normative legal research.

This research is expected to be useful for The House of Representatives of the Republic of Indonesia (DPR), the Ministry of Law and Human Rights, the Indonesia Financial Services Authority (OJK) and Bank of Indonesia (BI) in drafting the Fintech Law.

This research is expected to increase protection for consumers, investors and providers of fintech services and accelerate the growth of the digital economy in Indonesia.

Regulating fintech in the Indonesian Law is meant to give legal certainty and better legal protection for consumers, investors and providers of fintech services. Seeing that the value of the Indonesian digital economy in 2019 has reached USD40bn (approximately IDR586tn), Indonesia is philosophically, juridically and sociologically in urgent need of Fintech Law.