Definition of Fintech – Does Readers know about the definition of fintech? Ever heard of but don’t know what fintech is? Currently, we can do almost all activities using our mobile phones , such as transacting online with mobile banking or even opening an account.
The definition of Fintech or financial technology is an innovation in the field of financial services that has been on the rise in Indonesia in recent years. This fintech can provide services in a practical, efficient and economical way. So, in the explanation below, we will discuss further about what fintech means.
Definition of Fintech
The definition of Fintech is an innovation in the financial services industry that utilizes the use of technology. Fintech products are usually in the form of a system built to carry out a specific financial transaction mechanism. Fintech is here for those of you who want to access financial services in a practical, efficient, comfortable and economical way.
The existence of fintech greatly influences the lifestyle of the economic community. The combination of effectiveness and technology has a positive impact on society in general.
Development of Fintech in Indonesia
Along with the rapid development of technology and the growth of startup companies, the greater the development of fintech in Indonesia. In Indonesia, fintech itself started in 2006, but unfortunately at that time there were still companies that used this technology little.
In 2015, the Indonesian fintech association was then established and then public trust started to grow after that. Fintech companies in Indonesia are also experiencing rapid growth, with up to 140 companies listed on the OJK fintech list.
Then, in 2017 sharia fintech began to develop. Sharia fintech is a type of fintech that operates on the basis of Islam. After that, the Indonesian Sharia Fintech Association was formed which oversees Islamic fintech in Indonesia.
Legal Basis for Application of Fintech in Indonesia
Then, the application of fintech in Indonesia has also been regulated by the government through the issuance of Bank Indonesia regulations. The following is the Legal Basis for Fintech in Indonesia
- Bank Indonesia Circular No. 18/22/KSP regarding the Implementation of Digital Financial Services.
- Bank Indonesia Regulation No. 18/17/PBI/2016 regulates matters related to Electronic Money
- Bank Indonesia Regulation No. 18/40/ PBI/2016 stipulates the Implementation of Payment Transaction Processing.
Benefits of Indonesian Fintech
The development of fintech in Indonesia brings many benefits to its users. The following are the benefits of fintech:
1. Financial Transactions Are Easier
The first benefit is that financial transactions become easier. When you make financial transactions, you don’t need to go to a bank or an ATM to make a transaction. You can do this using your smartphone . Therefore, fintech also makes it easier for the community.
2. Better Access to Funding
Thanks to fintech, financial technology is developing rapidly, so that it can reach various groups of people. This also causes more and more people to understand how to get financial assistance to support their daily activities.
3. People’s Standard of Living Has Improved
After the benefits of getting better access to funding, then the community can use these funds to finance the consumptive and productive activities they want. Then, the standard of living and welfare of the community will increase.
4. Supporting Financial Inclusion
Financial inclusion is community involvement in economic transactions, from buying and selling contributions to savings and loans. The ease with which fintech exists bridges various economic accesses, so that financial inclusion is increasing.
5. Accelerating Economic Turnover
Access to finance and ease of transactions will encourage faster and more practical economic circulation. In addition, fintech can help business people to get capital with low interest through online loans, which are a form of fintech product.
6. Helping MSMEs for Business Capital
Before the emergence of financial technology, all MSMEs used to rely on bank loans for their business capital. Bank loans usually have quite high interest and quite difficult procedures and requirements.
For fintechs that have received OJK supervision and are registered with OJK, this fintech can provide solutions for MSME business capital.
Types of Fintech in Indonesia
There are several types of fintech in Indonesia that have helped people solve various problems. The following are types of fintech in Indonesia.
1. Crowdfunding
This type of fintech can also be interpreted as fundraising. Crowdfunding is a fintech model that is currently popular not only in Indonesia but in various countries.
With this technology, people can raise funds or donate to an initiative or social program that is of concern to them. An example of a fintech startup with this model that is currently popular in Indonesia is Kita Bisa.com
2. Microfinancing
Microfinancing is a fintech service that provides financial services for the lower middle class to help with their daily lives and finances. Usually, people with a middle to lower economy will experience difficulties in obtaining venture capital to develop their businesses or livelihoods.
Therefore, micro financing seeks to bridge this problem by channeling business capital directly from lenders to prospective borrowers. This business system is designed so that returns are competitive for lenders and remain attainable for borrowers.
An example of a startup engaged in this field is Amartha, which connects rural micro-entrepreneurs with online investors.
3. P2P Lending Services
This type of fintech is known for lending money. This fintech helps people who need access to finance to meet their needs. With this fintech, consumers can borrow money more easily to meet various needs of life without having to go through the long and convoluted process that is often found in conventional banks.
One example of a fintech engaged in the field of money lending is AwanTunai, which is a start-up that provides safe and easy digital installments.
4. Market Comparison
With this fintech you can compare various kinds of financial products from various financial service providers. This fintech also functions as a financial planner. With the help of this fintech, users can get several investment options for their future needs.
5. Digital Payment Systems
This type of Fitech is engaged in providing services in the form of paying all bills such as credit and postpaid, credit cards, or PLN electricity tokens. One of the fintechs engaged in this field is Payfazz which is agency-based to help Indonesian people, especially those who do not have access to a bank to make monthly bill payments.
6. Payment Gateways
The increasing number of e-commerce platforms in Indonesia will also trigger fintech payment gateway companies. This company has a function as a bridge between customers and e-commerce fintech companies.
You no longer need to go to a bank or ATM to make transactions because by writing a nominal amount of money, the payment transaction process via virtual can be done immediately.
This fintech is also based on a legal umbrella from Bank Indonesia, so all transactions made are of course safe. From a technological standpoint, the payment gateway is equipped with 3 tracking systems to protect against data theft, namely the Address verification System (AVS), Card Security Code (CV2) and 3D Secure password.
7. Insurtech
The development of insurance in Indonesia is growing rapidly. One proof of the development of insurance is the number of e-commerce platforms that trade insurance products. The existence of this fintech makes it easy for the public to be able to access insurance services, starting from products, evaluating customer data to buying policies that can be done via a smartphone.
8. Asset Management
Managing finances is something that is still difficult to do. However, with this type of fintech, you can manage your finances and can track where your money has gone and how much you have used.
For those of you who are still having trouble managing personal money, this type of fintech really helps you. What’s more, it’s not just individuals, you can manage money on a large business scale with this type of fintech.
9. Remittances
This type of fintech provides money transfer services between countries. Remittances aim to help people who do not have domestic or foreign bank accounts to make transfers.
The existence of this fintech helps TKI, TKW or those who have family who are abroad to send money easily and cheaply.
10. Investment
Currently, investment is in great demand by young people, this is because investing is no longer difficult to do. Many investment applications provide online services. There are also many products that you can choose for investment, such as online mutual funds to bitcoin.
Characteristics of Illegal Fintech to Watch Out for
The presence of fintech companies makes it easy for people who need fast funds. Thus causing illegal fintech to also emerge and increasingly harm people who do not have any knowledge.
This is because illegal fintech will ask its victims to pay loan bills and the interest will increase. The following are the characteristics of illegal fintech that you need to be aware of.
- Illegal fintech does not have legality, meaning that illegal fintech is not registered and does not have an official permit from the OJK.
- Provides very high interest, fines and other fees and tends to be unclear in the billing process.
- The billing process is carried out unethically and tends to be abusive and even threatening
- Illegal fintech will access consumer data such as contacts, cameras, microphones and others.
- Illegal fintech also lacks services such as complaint contact.
Referring to the OJK website , recently the Financial Services Authority (OJK) has again blocked 3,193 illegal online loans because they were caught using customer data to collect debts in an intimidating way.
Features of Legal Fintech
To find out the list of legal fintech companies, you can see them on the OJK’s official website. So, here are the characteristics of a legal fintech company, namely:
1. Licensed and registered with OJK
Legal companies are companies that have official licenses and are registered with the OJK. So that in running its fintech business, companies must follow the regulations set by the OJK.
If fintech commits a violation, the OJK has the authority to revoke the license or even block the company. That way, people are also calmer when making loans.
2. Information about the company is clear
Obtaining a permit from the OJK is not an easy thing to do for an ordinary company that is not clear. OJK will definitely ensure that the company really exists and is not as fraudulent as illegal fintech services.
As you know, to create a company that is a legal entity, you must attach a clear office address. OJK will check whether the office address listed is correct.
Make sure you look for clear information about fintech companies before applying for a loan, starting from the company address, assessments from other people who have borrowed funds, so that the website or application is guaranteed to be safe.
Also find out whether the company has a consumer contact service that can be contacted so that you can easily get help if a problem occurs.
3. Fees charged are in accordance with OJK
As explained above, a legal fintech company is definitely obliged to follow all the rules that have been given by the OJK, including those related to the issue of interest rates. Fintech companies that already have licenses and are registered with the OJK are only allowed to charge consumers a maximum interest of 0.8 percent per day.
There are several advantages for you if you trust a fintech that is licensed by the OJK. Borrowing money from legal fintech is certainly cheaper with a more transparent process.
In addition, the security of your data has been guaranteed by ISO. Legal fintech is also directly monitored by OJK, as well as handling restructuring when needed. Socialization activities are also continuously pursued so that people are no longer entangled in unlicensed fintech.
Examples of Popular Fintech Companies in Indonesia
Here are the most popular Fintech companies in Indonesia
1. My Capital
This platform is of the peer to peer lending type which allows MSME owners to apply for loans of as much as 50 million to 500 million rupiah within three to twelve months. Modalku will receive a commission of 3 percent from the loan and 3 to 4 percent from the investor.
2. My finances
Finansialku (PT Solusi Finansialku Indonesia) is a financial planning company that has educational channels, financial applications, and financial consulting. As of August 2020, this Indonesian fintech company has collected seed funding with a total of US$3.3 million.
3. Kredivo
Kredivo is an example of fintech in Indonesia with a loan concept without a credit card with a fast registration and disbursement process. Kredivo also offers convenience in cash loans with the lowest interest compared to similar companies.
4. GO-PAY
To support the various services owned by the GO-JEK on demand application, GO-JEK finally created a service called GO-PAY to support non-cash payment services. Currently, the majority of GO-JEK users have used this service because many customers are spoiled with various tempting discounts and prizes that can be exchanged for points earned.
5. OVO
OVO can be said to be a strong competitor for GO-PAY. OVO, like GO-PAY, is a digital wallet application that makes it easy for users to make non-cash transactions. With promos that attract customers, one of the largest fintech companies in Indonesia also collaborates with many merchants and has even worked with more than 200,000 SMEs across Indonesia.
6. TaniFund
TaniFund is a fund loan service that is different from loans for businesses or businesses only. However, this platform provides solutions for farmers, ranchers and fishermen in Indonesia to gain access to finance in an effort to develop their respective sectors.