bank indonesia

[2020 Update] Bank Indonesia Launches Regulation on Fintech

  • InCorp Editorial Team
  • 29 December 2017
  • 3 minutes reading time

For the first time in the history of Indonesia, Bank Indonesia (BI) launched a regulation on financial technology also known as fintech. Regulation Number 19/12/PBI/2017 regarding the Provision of Financial Technology, dated November 30, 2017 (“Reg. 19/2017″), was made public by BI on December 7 and will come to effect on December 30, 2017.

The regulation was intended to support the development of financial technology ecosystem and the Indonesian economy. For this reason, some restrictions have been arranged with two being the most important – obligation to register for the fintech providers and prohibition to use digital currency.

What is Fintech?

Bank Indonesia defines fintech as the use of technology in a financial system that generates products, services, technology and/or new business models, and may have an impact on monetary stability, financial system stability and/or the efficiency, fluency, security, and reliability of payment systems.

Do all Fintech Providers in Indonesia Have to Register?

A fintech provider is defined as any party that organizes fintech activities. These are divided into following sectors: payment system; market support; investment and risk management; lending, financing, and provision of capital; and other financial services.

In general, all fintech providers are obliged to register except for:

  1. Existing Payment System Service Provider that already obtained a license from Bank of Indonesia
  2. Fintech Provider under another authority

However, existing Payment System Service Provider must still submit information concerning products, services, technology and/or new business model, in accordance with the criteria of financial technology. Furthermore, fintech provider engaged in payment system under the jurisdiction of other authority than BI and that provides payment system financial technology must still register with BI.

What if I Fail to Register?

Bank Indonesia has also defined sanctions for both Fintech and Payment System Providers that fail to register their business until June 30, 2018.
Sanctions for unregistered Fintech Provider:

  1. Warning Letter
  2. Suspension of business activity
  3. Other action concerning payment system activity
  4. Recommendation to the authority to revoke the business license

Sanction for unregistered Payment System Provider:

  1. Warning Letter
  2. Fine
  3. Suspension of Payment System Service in partial or whole
  4. License revocation as Payment System Provider

Is it Possible to Use Virtual Currency?

Virtual currency is not considered as a legal payment instrument in Indonesia, and fintech providers are prohibited from using it when conducting payment system activities. In general, no other money than the one issued by the monetary authority and obtained by way of mining, reward system or purchase, can be used.

2020 Update on Fintech in Indonesia

In September 2018 the OJK issued a new regulation for the establishment of fintech companies in Indonesia called the Digital Financial Innovation Regulation for Fintech Companies.

In accordance with this applicable regulation, to establish a fintech company or digital service platform, whether it is an institution or a startup, the following process must be undertaken:

  • You will have to register your company to the OJK and after, you will have to go through a Regulatory Sandbox, which is used by the OJK to test, observe and determine how the fintech companies work. Institutions can submit their Regulatory Sandbox’s request with one of these fields: capital markets, banking, or non-banking financial industries.
  • The entire Regulatory Sandbox process takes 12 months. The process may be extended for 6 more months when deemed necessary.
  • Finally, you can then apply for a fintech permit at the OJK.

Final Note

Financial Technology in Indonesia is a very hot topic. Do not let yourself to be trapped in regulations and contact the professionals from Cekindo.

Verified by

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Frequently Asked Questions

    In Indonesia, there are three company types that you can establish based on your business nature, requirements, and preferences.

    • Local Company (PT): 100% local ownership.
    • Foreign Company (PT PMA): can be entirely owned by foreigners; however, restrictions in business sectors apply
    • Representative Office: a branch of the parent company overseas whose purpose is to conduct marketing-related activities without generating income or profits

    There are a few things to consider, such as:

    • Prohibit any form of discrimination and provide equal opportunity for Indonesians and expatriates
    • Increase the competence of workers by giving or encouraging job training.
    • Follow the termination procedures (Terminating an employee in Indonesia can be long, tedious, and expensive.
    • Observe working hours, holidays, and overtime regulations
    • Give mandatory employee benefits, including social security and health insurance
    • Withhold only the right amount of income tax on behalf of the employees
    • Follow the wages and other benefits outlined by the law
    • Process work permits for foreign employees

    Within the scope of foreign direct investment in Indonesia, foreign investors can typically do business in two ways:

    • Set up a PMA (Perusahaan Modal Asing)
    • PMA is a local subsidiary in the form of a limited liability corporation for foreign investment reasons

    • Set up a RO (Representative Office)

    According to Law No. 25/2007 on Investment, foreign investors are required to establish a PMA company in order to make direct investments and conduct commercial and business activities in Indonesia. A PMA firm in Indonesia is a legally recognized business entity that can engage in various commercial and business operations as long as it complies with the current laws and regulations. As for RO, its purposes include conducting market feasibility studies and liaison activities.

    To provide you with accurate pricing information for our HR outsourcing services, we consider the complexities of your inquiries and the dynamic nature of regulations in Indonesia. As a result, the pricing for the service may vary accordingly. For detailed information, please get in touch with our consultants.

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The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.