LendingClub is a pioneer in peer-to-peer lending and one of the largest platforms in the United States. It will be departing from the business model that was once key to its success. LendingClub is not the first and may not be the last. Is the business model not sustainable? Could this also be happening in Indonesia? There are several factors to observe.

First, the regulation. Based on Financial Services Authority (OJK) Regulation No. 77/2016 on technology based fund lending services, fintech lenders can be individuals or legal entities. This is the umbrella that protects both retail and institutional customers who use fintech lending platform services.

In accordance with the regulation, the OJK has taken serious measures to protect customers from illegal lending practices. In its recent press release, the OJK said that between 2018 and September 2020, its Investment Alert Task Force had successfully shut down 2,840 illegal fintech firms.

Four years since the issuance of this regulation, the fintech lending sector saw rapid growth. The OJK’s August 2020 statistics on the development of fintech lending shows an accumulated total of 669,580 lender entities, an increase of 26.24 percent from the previous year. This is very encouraging. Even amid the crisis, these data show that the general population is still comfortable in making investments, which will assist in lubricating the wheels of the economy.

Second, the costs and benefits. In retail business, the growth in the number of customers does not necessarily translate into profit growth. Fintech firms must allocate sufficient resources to manage the various risks associated with retail customers. Such as the responsibility to improve literacy, to provide complete information, to provide virtual accounts and to be able to handle customer complaints or disputes. Although this obligation applies also to institutional customers, risk differences between these two groups are worlds apart.

Retail customers have their own characteristics. Take customers’ data as an example. Fintech firms must ensure that the acquisition, use and disclosure of customer data is based on consent from data owners. In addition, they must provide communication media aside from the electronic systems to ensure the continuity of customer service. Notification in writing to the data owners needs to be performed in the event of failure to do so.

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