Developing Fintech Security

MELATI MEWANGI UNTUK KOMPAS

A frontispiece bearing the logo of coworking space GoWork marks Unit 102 AB on the ground floor of the Setiabudi 2 building on Jl. HR Rasuna Said in Kuningan, Jakarta. PT Masyarakat Sejahtera Maju has been found to be fraudulently using the address as the location of its business.

Financial technology is like a double-edged sword: on the one hand, it makes financial transactions more efficient; while on the other, it raises data security issues.

Kompas daily’s three-day special report covered fintech businesses that offer consumer loans, which have been sprouting like mushrooms during the rainy season. Such business activities are legal when registered with the Financial Services Authority (OJK), but more than a few are unregistered and therefore illegal.

The OJK has banned 947 illegal fintech applications, but new illegal fintech apps continue to emerge. A developer can easily create a new app when authorities block a previous app for violating the rules.

KOMPAS/BENEDIKTUS KRISNA YOGATAMA

Victims of online loans hold up posters accusing the Financial Services Authority (OJK) of “being asleep” during a rally on Saturday (23/3/2019) at the Jakarta Police Headquarters.

The mushrooming growth of fintech lending apps is inseparable from consumers’ need for funds. Fintech is preferred compared to conventional financial institutions like banks that require collateral, because it provides convenience for borrowers, especially in the micro- and small-scale business segment.

At the same time, consumers are not fully aware of the risks of easy loans, one of which is that the fintech app collects their personal data.

The personal data the app collects is valuable information that the fintech company can transfer to third parties – without the individual’s permission – for the purpose of targeted marketing and for potential fraud.

On the other hand, fintech services provide several benefits for people, especially entrepreneurs of micro, small and medium enterprises (MSMEs) who need business capital. The service has greater flexibility and wider consumer reach compared to conventional financial services such as banks, which have conditions that MSME entrepreneurs may not be able to meet.

KOMPAS/WISNU WIDIANTORO

A man looks at an SMS dated 14 June 2019 promoting an online loan on the screen of his mobile phone on Sunday (16/6/2019) in Jakarta.

The ease of access and advances in digital technology have made fintech services popular. An Accenture report said that global investment in fintech increased in 2018 to US$55.3 billion, 58 percent of which was in the Asia-Pacific.

The breakdown showed that 28 percent was invested in loan-related businesses, 26 percent in payment businesses and 20 percent in digital insurance. The investment breakdown shows that the opportunity in fintech lending services is huge. It generates very large and multiple economic impacts.

KOMPAS/BENEDIKTUS KRISNA YOGATAMA

Employees are seen at work on 28 March 2019 at the developer of the banned financial technology application, Angel Cash, at the Grha Arda building in Kuningan, Jakarta. The Financial Services Authority (OJK) and the Information and Informatics Ministry blocked the application in September 2018.

Seeing the rapid development of fintech, it is only normal that financial authorities must immediately regulate all matters related to these services, from educating the public in digital financial literacy to protecting consumer data and to regulating loan interest rates. Regulation is necessary to ensure that these services will benefit investors, fintech companies and consumers while driving the national economy.