INTRODUCTION

The COVID-19 pandemic has arguably accelerated changes in consumer behaviour, leading to more people performing economic activities online. One important change is the adoption of fintech as a preferred transaction and payment method. This trend is driven by a significant proportion of the unbanked population and the lower-income segment in urban areas. New fintech start-ups such as ShopeePay (E-wallet), Shopee Paylater (Buy Now Pay Later or BNPL) and Kredivo (Online Lending Service) and Bibit (Mutual Fund Invesment) have all introduced innovative ways to offer online financial services in Indonesia’s rapidly growing digital economy.

Fintech enterprises offering E-wallet, BNPL, Online Lending, Insurance and Multifinance require approval from the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan or OJK), whereas fintech enterprises dealing with investments, stock/mutual funds and cryptocurrencies require approval from the Commodity Futures Trading Supervisory Agency (Badan Pengawas Perdagangan Berjangka Komoditi). In 2012 OJK replaced the previous Capital Market Supervisory Board (Bapepam LK or Badan Pengawas Pasar Modal & Lembaga Keuangan) and holds wider authority in supervising and regulating the capital market and financial institutions. Fintech enterprises undergo a two-step process to obtain permits from OJK: the first involves reporting and analysing the suitability of pursuits and business processes with current government regulations; and secondly, upon further recommendations, fintech start-ups are mandated to register the business with OJK by compiling a self-assessed risk mitigation portfolio and devising a collaboration scheme with government inspectors to avoid money laundering and to establish a consumer service centre for consumer protection. The innovations brought about by fintech startups show similarities to the technology and business processes within the various fintech categories in Indonesia; standardization is, however, still a work in progress. This is occurring in the area of their services, their transaction and payment methods, the timeframe involved, the quality of the fintech platforms, and the rights and responsibilities of both the industry and consumers.

Along with improved services and increased transparency, fintech is gaining momentum and changing the economic landscape in urban and peri-urban areas. This is due to its decentralized, personalized and efficient nature. We observed lower psychological barriers to enable digital literacy and spread fintech adoption among Indonesia’s middle-and lower-income urban households.