The Development of Fintech in Indonesia

Fintech is the abbreviation from the words financial and technology. It has a meaning of innovation in the financial industry. Fintech is one type of company that is engaged in financial service. In fintech, all company operations and product users use the technology. Fintech has a good impact on the community that makes the transaction more efficient and practical. Moreover, it could also help the community to get access to financial products easier and improving financial literacy. According to Bank Indonesia, in 2016 The Financial Services Authority has issued a new regulation regarding fintech. It is concerning the borrowing off-balance-sheet by the market, and the payment transaction process by Bank Indonesia (BI).

Bank Indonesia asserted that the development of fintech users has significantly increased, from 7% in 2006/2007 to be 78% in ten years later. The number of users is stated to be 135-140 companies (Anggraini, 2019). 43% of the users are in the payment sector, such as mobile payment and payment gateway startups. An interesting facts state that 20 foreign companies participated to invest in fintech (Anggraini, 2019). According to LinovHR, in 2017, there are 140 fintech companies are listed in The Financial Services Authority. This includes public and private banks that release special fintech services for their customers.

The existence of Fintech Companies has brought a lot of benefits for Indonesian society, especially for the retail and small-medium enterprise (SME) in raising their capital. First of all, Fintech has helped in the development of a start-up company. Nowadays, there are many start-up companies or start-up that carry digital technology apps as their main idea. These new companies need assistance in their capital. Several Indonesian fintech provides capital assistance by installments. Second, it can improve the quality of life. Fintech could increase the quality of life and improve the country’s economy. Especially, right now we’re still in the covid-19 pandemic where many people have suffered because of losing their job. There are many fintech provide lending with low-interest rates and without an administration fee. Therefore, people can still lend money without afraid of the compounding interest they need to pay later on. Moreover, it has an ease of financial services. Fintech has prioritized the ease of financial services for its customers. This convenience is not only limited to borrowing money or paying the installments. Right now, it is also possible for the users to make a transfer to bank accounts, non-cash payments at various merchants, electricity bill payments, BPJS payments, etc (LinovHR, 2020). Furthermore, fintech also helps the capital of small-medium enterprises or it sounds more familiar as Usaha Kecil Mikro Menengah (UMKM) in Indonesia. They provide a lower interest rate for those who borrowed money. Previously, most of the UMKM in Indonesia used bank loans for their business capital. However, applying for a loan to a bank is quite difficult and needs many requirements. Besides, the bank has a higher interest rate. Since the emergence of Fintech, the lending system can also be carried out online in Peer to peer (P2P) lending. Where the UMKM who need capital will be met with investors who are willing to lend their funds. This process can be done fully online. Some of the Fintech companies in Indonesia that are already registered in The Financial Services Authority (OJK) are Amartha, Akseleran, Investree, and Modalku. These are some of the best choices of fintech companies because customers are better protected from the risk of fraud since it’s supervised by The Financial Services Authority.