inancial technology (fintech) firms are cooperating with banks and other companies to provide public services, including by helping disburse the government’s COVID-19 relief package, says an association leader.
Adrian Gunadi, chairman of the Indonesian Fintech Lenders Association (AFPI), said on Wednesday that peer-to-peer (P2P) lending provider Investree had received an allocation from state-owned Bank Mandiri to disburse national economic recovery funds to several small business customers.
“That is one way we could see fintech playing a very big role, especially when everything is going digital because of the pandemic,” Adrian said at Jakpost Fintech Fest, a virtual discussion held by The Jakarta Post. “The government is moving toward a less-contact economy.”
“I think that is where fintech will become more relevant. It has to be part of a bigger ecosystem for us to be able to accelerate the relief effort for Indonesia."
The government has set aside Rp 695 trillion (US$46.9 billion) for COVID-19 relief efforts, although only 36 percent of the budget has been spent.
Investree is also taking part in the government’s e-procurement program, which seeks products from small and medium enterprises (SME) for state procurement. The government expects to spend Rp 700 trillion in the procurement.
“When you talk about government relief programs, we have to make sure that the program or the funds reach the right person or the right business. So that is where you need to have clarity on the profiling or credit profiling of the business,” Adrian added.
E-wallet company Ovo, which has seen 150 million downloads of its mobile app, is working with state-owned electricity company PLN to disburse the government’s electricity subsidy to more than 100,000 families, said Natasha Ardiani, the company’s vice president of lending services.
Natasha said the company was supporting Bank Indonesia’s directive to increase cashless transactions to prevent COVID-19 transmission through the exchange of banknotes. During the pandemic, she said, more Ovo users had been using the payment service to buy necessities, as shown by the 15 percent reduction in average basket size.
“The COVID-19 outbreak has created the need for the digital adoption of payment and financial services sooner rather than later,” Natasha said.
The e-wallet company expects its fourth-quarter revenue to be 7.4 times that of the January-March period last year, propelled mostly by growth in payment services.
Sukarela Batunanggar, deputy commissioner of the Financial Services Authority (OJK) Institute and Digital Finance, said fintech companies would have roles in the future economy by providing easy and low-cost transactions, thus enabling them to respond quickly to consumers.
“That is very good to drive healthy competition in the financial industry,” said Sukarela. “So we expect this to create not only competition but also some changes in the industry landscape going forward.”
But the increase in digital transactions has also demonstrated a downside. Digital banking platform Jenius has received a number of fraud complaints from customers buying face masks and clothes on the internet, said Darmadi Sutanto, deputy president director of publicly listed lender BTPN, which operates the platform.
“In the past few months, there have been misunderstandings from clients. Not about digital banking but about the way they transact on social media, in this digital space. This is something that we see as a need to educate the market,” said Darmadi.
Bank Indonesia and the OJK have both recently issued short-term digital financial system road maps that detail policies, regulations, customer protection efforts, talent development, collaboration and acceleration.
Ravi Ivanuri, an advisor at consulting firm PricewaterhouseCoopers (PwC), said few other national financial authorities in the region had issued such documents, placing Indonesia ahead of the game in terms of creating a conducive environment for fintech. But he said there should be more coordination among regulators.
“Maybe in the next one or two or three years, if there is more and more collaboration set up between these regulatory authorities, there will be more clarity for fintech players in terms of how to comply with these different regulations,” said Ivanuri.
As of June, there were 161 registered P2P lending companies, 12 of which were sharia-compliant, according to data from the OJK. They had connected 20.6 million borrowers with 539,460 lenders.
However, the pandemic is taking a toll on the fintech industry. Its non-performing loan (NPL) ratio has risen to 7.99 percent, part of a worsening trend since the beginning of the pandemic, according to data from the OJK. The NPL was 4.22 percent in March of this year, higher than the 2.62 percent in March 2019.
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