Financial technology (fintech) is expected to become a major driver of financial inclusion in Indonesia. The country is preparing itself to embrace future disruptions with the government’s 2020 Go Digital Vision to boost overall growth, improve workers’ skills, and create jobs.
Fintech is at the core of plans to meet the target of 75% of Indonesians gaining access to a formal bank account by 2019 set out in the National Strategy for Financial Inclusion. Being less homogeneous than banks, fintech companies can create a more diverse, secure, and stable financial services landscape.
Unburdened by legacy systems, fintech companies have greater scope to reduce costs and improve service quality. For example, by leveraging big data, machine learning and alternative data, fintech firms can develop innovative risk assessment models to generate credit scores for customers with limited credit histories. Shaping a stable and cost-efficient ecosystem for fintech in Indonesia is a significant but manageable challenge.
Realizing that technology and market forces alone cannot be the solution, policymakers and financial sector regulators are developing a comprehensive roadmap to create an enabling and regulatory environment to maximize fintech potential while ensuring consumer safety and financial stability. The roadmap needs to entail taking 3 significant steps.
First, creating a national digital identification system will ensure that every Indonesian has a unique demographic number. This will help address the root of the problem, namely the know-your-customer verification.
With a digital registry and authentication at the point of service, the government can better allocate budgetary resources and track their impact more effectively to improve access to the social sector.