Indonesia: Fintech

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This country-specific Q&A provides an overview to Fintech law in Indonesia.

It will cover open banking, regulation of data, cryptocurrencies, blockchain, AI and insurtech.

This Q&A is part of the global guide to Fintech. For a full list of jurisdictional Q&As visit

  1. What are the sources of payments law in your jurisdiction?

    SSEK: Depending on the payment service provided, the relevant regulations are as follows:

    a. Payment Transaction Processing
    - Bank Indonesia (“BI”) Regulation No. 18/40/PBI/2016 regarding Provision of Payment Transaction Processing (“PTP Regulation”);
    - BI Circular Letter No. 18/41/DKSP regarding Provision of Payment Transaction Processing.

    b. Card-Based Payment Instrument
    - BI Regulation No. 11/11/PBI/2009 regarding Provision of Card-Based Payment Instruments, and its amendment;
    - BI Circular No. 11/10/DASP regarding Provision of Card-Based Payment Instruments, and its amendment.

    c. Electronic Money
    - BI Regulation No. 20/6/PBI/2018 regarding Electronic Money;
    - BI Circular No. 16/11/DKSP regarding Provision of Electronic Money, and its amendment.

    d. Fund Transfer
    - Law No. 3 of 2011 regarding Fund Transfer;
    - BI Regulation No. 14/23/PBI/2009 regarding Fund Transfer;
    - BI Circular Letter No. 15/23/DASP regarding Provisions of Fund Transfer.

    e. National Payment Gateway
    - BI Regulation No. 19/8/PBI/2017 regarding National Payment Gateway;
    - BI Board of Governors Regulation No. 19/10/PADG/2017 regarding National Payment Gateway.

    f. Financial Technology
    - BI Regulation No. 19/12/PBI/2017 regarding the Provision of Financial Technology (“BI Fintech Reg”);
    - BI Board of Governors Regulation No. 19/14/PDAG/2017 regarding Regulatory Sandbox;
    - BI Board of Governors Regulation No. 19/15/PDAG/2017 regarding Procedures for the Registration, Submission of Information, and Monitoring of Financial Technology Providers;
    - Financial Services Authority (“OJK”) Regulation No. 13/POJK.02/2018 regarding Digital Financial Innovation in the Financial Services Sector (“OJK Fintech Reg”).

  2. Can payment services be provided by non-banks, and if so on what conditions?

    SSEK: Generally, there is no prohibition for non-bank institutions to provide payment services, be it the provision of card-based payment instruments, electronic money, or otherwise. Non-bank institutions can provide payment services to the public provided that they obtain the relevant license to provide such payment services. The conditions to be fulfilled depend on the payment services provided, and can range from legal requirements (e.g., completion of documents evidencing the legality of the non-bank institution) to more technical requirements, such as the result of an IT audit of the system used to provide the payment services.

  3. What are the most popular payment methods and payment instruments in your jurisdiction?

    SSEK: Despite the introduction of the Cashless National Movement (Gerakan Nasional Non-Tunai) in 2014, hard cash remains the most popular payment method in Indonesia. Following hard cash are debit and ATM cards, making up more than half of all non-cash transactions. It is suspected that the relative lack of cashless transactions is the result of Indonesia’s large area and the lack of uniform cashless infrastructure.

  4. What is the status of open banking in your jurisdiction (i.e. access to banks’ transaction data and push-payment functionality by third party service providers)? Is it mandated by law, if so to which entities, and what is state of implementation in practice?

    SSEK: Under Indonesian law, banks are subject to banking secrecy/confidentiality obligations, which are regulated by Law No. 7 of 1992 regarding Banking, as lastly amended by Law No. 10 of 1998 (the “Banking Law”). Under the Banking Law, banks and their affiliates are obliged to keep confidential information regarding its depositing customers and any sums deposited by such customers. This confidentiality obligation does not cover information provided by non-depositing customers.

    However, this initial confidentiality of bank customers’ personal data can be bypassed for certain reasons. Under the Banking Law and BI Regulation No. 2/19/PBI/2000 regarding Requirements and Procedure to Grant Written Orders or Approval to Disclose Bank Secrets, information covered by the banking confidentiality obligation can be released:

    a) for taxation purposes;
    b) to settle a bank’s receivables that have been given to the State Receivables and Auctioning Agency (Badan Urusan Piutang dan Lelang Negara) or the State Receivables Committee (Panitia Urusan Piutang Negara);
    c) for the purposes of the court in criminal cases;
    d) for the purposes of the court in civil disputes between a bank and its customer;
    e) for the exchange of information between banks;
    f) on the written request, approval, or authority of the depositing customer; and
    g) on the request of the valid heir of a deceased depositing customer.

    For disclosures as mentioned in points (b) and (c), the disclosing bank must first obtain an order or written approval from the head of BI. The person or entity receiving the disclosed information would depend on the circumstance justifying such disclosure (e.g., other banks in the case of point (e); the heir in case of point (g); the police, prosecutors, or the court in the case of point (c) or (d)).

  5. How does the regulation of data in your jurisdiction impact on the provision of financial services to consumers and businesses?

    SSEK: The wide net cast by the current Indonesian data protection regime does little to address sensitive issues specific to fintech. While several regulations pertaining to financial institutions attempt to provide further requirements for data protection, no more onerous specifications are given in those specific regulations than those already established in general personal data protection regulations. These general personal data protection regulations are Law No. 11 of 2008 regarding Electronic Information and Transactions, as lastly amended by Law No. 19 of 2016 and its implementing regulations, e.g., Government Regulation No. 82 of 2012 regarding the Provision of Electronic Information and Transactions, and Minister of Communication and Informatics Regulation No. 20 of 2016 regarding the Protection of Personal Data in Electronic Systems (together, the “PDP Regulations”). As the requirements set forth in the PDP Regulations are relatively standard, e.g., the requirement of consent to handle any personal data, they do not have a significant impact on the provision of financial services to consumers and businesses.

  6. What are regulators in your jurisdiction doing to encourage innovation in the financial sector? Are there any initiatives such as sandboxes, or special regulatory conditions for fintechs?

    SSEK: BI and the OJK issued the BI Fintech Reg and OJK Fintech Reg, respectively, to encourage innovation in the financial sector. Both regulations provide for a sandboxing mechanism through which fintech providers can test their products to ensure they fulfil the criteria and requirements for “fintech” and “financial digital innovation” contained in the respective regulations.

  7. Do you foresee any imminent risks to the growth of the fintech market in your jurisdiction?

    SSEK: We do not believe there are any imminent risks to the Indonesian fintech market at present. If anything, it is the opposite, with Indonesian regulators becoming more open to accommodating fintech products that do not necessarily fall under a specific category of financial product under the current nomenclature.

  8. What tax incentives exist in your jurisdiction to encourage fintech investment?

    SSEK: No tax incentives exist in Indonesia specifically for fintech investment.

  9. Which areas of fintech are attracting investment in your jurisdiction, and at what level (Series A, Series B etc)?

    SSEK: Based on the past couple of years, peer-to-peer lending appears to be the most popular investment choice for venture capital, with many of the investments being Series A investments.

  10. If a fintech entrepreneur was looking for a jurisdiction in which to begin operations, why would it choose yours?

    SSEK: One of Indonesia’s greatest appeals lies in the potential market it houses for digital products. The number of internet users in Indonesia reached approximately 123 million in 2018, placing Indonesia sixth in terms of most internet users worldwide. This potential market, accompanied by a sizeable consumer base and a rapidly growing middle class, has drawn investors to Indonesia.

    Additionally, Indonesia is working to anticipate the rise of various fintech products by issuing regulations that are sufficiently broad in scope, such as the BI Fintech Reg and OJK Fintech Reg, and to facilitate foreign investments by integrating most licensing facilities.

  11. Access to talent is often cited as a key issue for fintechs – are there any immigration rules in your jurisdiction which would help or hinder that access, whether in force now or imminently? For instance, are quotas systems/immigration caps in place in your jurisdiction and how are they determined?

    SSEK: There is no quota system or immigration cap in Indonesia with respect to talents in the fintech field.

  12. If there are gaps in access to talent, are regulators looking to fill these and if so how? How much impact does the fintech industry have on influencing immigration policy in your jurisdiction?

    SSEK: Regulators in Indonesia do not currently seem to have any issues with possible talent gaps in the fintech sector. As such, there have been no actions taken by regulators in this regard.

  13. What protections can a fintech use in your jurisdiction to protect its intellectual property?

    SSEK: The following are the intellectual property rights that are recognized under Indonesian law:

    1. Copyright;
    2. Patent;
    3. Trademark;
    4. Industrial design;
    5. Trade secret;
    6. Geographical indication; and
    7. Integrated circuit topography.

    Generally, fintech providers would seek protection under copyright and trademark, although, depending on the service provided, other intellectual property rights may also be available. Aside from the above mentioned intellectual property rights, no special protection is afforded to fintech providers.

  14. How are cryptocurrencies treated under the regulatory framework in your jurisdiction?

    SSEK: BI issued an official statement banning cryptocurrency, and further strengthened this position with the issuance of the PTP Regulation. While the wording of the PTP Regulation suggests that the ban mainly concerns the use of cryptocurrency as a method of payment in Indonesia, Indonesian regulators, for the most part, have nonetheless adopted a rather strict approach toward the use of cryptocurrency in Indonesia, going so far as to oppose having cryptocurrency as a commodity that can be traded on futures exchange.

    Regulators and financial institutions here have justified their stance on cryptocurrencies such as Bitcoin by pointing to high price volatility, limited acceptance network, no central party administering their issuance, and customer protection risks.

  15. How are initial coin offerings treated in your jurisdiction? Do you foresee any change in this over the next 12-24 months?

    SSEK: Despite the regulators’ opposition to the general use of cryptocurrency in Indonesia, there have been several initial coin offerings in Indonesia. Lacking any legal basis to do so, there seems to be reluctance on the part of regulators to take concrete action to completely ban the use of cryptocurrency. We view it likely that there will be major changes to the status quo in the near future.

  16. Are you aware of any live blockchain projects (beyond proof of concept) in your jurisdiction and if so in what areas?

    SSEK: There are several live blockchain projects in Indonesia, includuing data marketplace and data exchanges. Cryptocurrency exchanges seem to be the most common of the live blockchain projects here.

  17. To what extent are you aware of artificial intelligence already being used in the financial sector in your jurisdiction, and do you think regulation will impede or encourage its further use?

    SSEK: Several fintech providers utilize artificial intelligence to process submitted data in order to cut costs and increase efficiency and accuracy (e.g., selecting potential borrowers for peer-to-peer lending providers, using chatbots to address frequently asked questions of customers, transaction screening to detect fraudulent transactions, recognition of behavior patterns to generate appropriate recommendations, etc.).

    The current regulations do not address artificial intelligence or the use thereof. However, given that some government institutions, including the Ministry of Communication and Informatics, utilize artificial intelligence it is likely that future regulations will encourage the further use of AI.

  18. Insurtech is generally thought to be developing but some way behind other areas of fintech such as payments. Is there much insurtech business in your jurisdiction and if so what form does it generally take?

    SSEK: Insurtech in Indonesia is at the moment an emerging market, but compared to, for example, payment systems, insurtech takes a back seat. The few insurtech businesses that have appeared take the form of microinsurance.

  19. Are there any areas of fintech that are particularly strong in your jurisdiction?

    SSEK: As of this writing, it appears the areas of fintech attracting the most investment in Indonesia are in the fields of payment systems and lending. Approximately 69% of all fintech companies currently in Indonesia are providing services in the payment system and lending fields, with a further breakdown of 38% in the field of payment systems and 31% in the lending field.

  20. What is the status of collaboration vs disruption in your jurisdiction as between fintechs and incumbent financial institutions?

    SSEK: Financial institutions, especially conventional banks, have been disrupted by the rapid growth of fintech in Indonesia. This is particularly the case for payment and alternative lending services, as fintech providers are able to offer more flexible lending terms than banks, which in Indonesia are much more heavily regulated. However, there has been a notable uptick in collaboration between banks and fintech providers, particulalry in the use of analytics (e.g., customer experience and mining of social media data).

  21. To what extent are the banks and other incumbent financial institutions in your jurisdiction carrying out their own fintech development / innovation programmes?

    SSEK: One of the biggest state-owned banks in Indonesia has started to replace its tellers with machines and re-training workers to become salespeople. Other banks are attempting to innovate by easing their policies and procedures (e.g., letting customers open bank accounts without having to visit the branch office, using chatbots to provide general banking information, etc.) or by establishing or participating in venture capital companies that invest in fintech companies.

  22. Are there any strong examples of disruption through fintech in your jurisdiction?

    SSEK: There is no one specific example of major disruption through fintech in Indonesia. However, as discussed in point 20 above, financial services institutions are generally threatened by the increasing number and growth of fintech companies, especially those offering peer-to-peer lending services.