Concerns over data regulations grow as fintech dominates Indonesia
Financial organizations are critical functioning bodies as they enable banking and financial services apart from serving as a catalyst for economic growth. As incumbents, they are fast to keep up with economic changes and trends, but it remains a fact that the sector tends to lag when it comes to adopting innovative solutions like financial technology (fintech), which has become a fixture in Indonesia, Southeast Asia’s largest economy.
The rapid ascension of fintech to solve region-specific financial issues has since gained significant prominence in Indonesia, making it a critical disruptor of the finance industry. Fintech products and services have quickly begun to resonate with Indonesian consumers as they are able to attract the unbanked population of the country.
The unbanked in Indonesia, through fintech capabilities, can now participate in the digital economy using features like e-wallets, mobile transactions, and contactless payment services – which in turn, allow greater purchasing power for consumers.
Although they can never fully replace the functions and importance of financial organizations, fintech companies seem to have seized many of the revenue opportunities that used to profit the finance sectors. While fintech disruptions have been consistent throughout the last few years, fintech companies in Indonesia still lack the rigid compliance systems that traditional financial organizations have.
As a result, worries grow over personal data protection policies that are in-place or the availability of data regulations to ensure compliance among fintech companies.
Admittedly, similar concerns have been raised against traditional financial organizations once they start transforming digitally, but since fintech companies are progressively gaining importance in the marketplace, the right policies must be implemented immediately.
Moreover, fintech products and services are especially highly data-driven and require consumers to provide and trust them with their personal data. The features alone reflect data constantly being retrieved and generated in the process which is alarming considering the increasing number of data breaches that have been happening globally.
Despite the ease that they offer, at the end of the day, Indonesians need to be ensured that their data is safe. In fact, according to a report, about 45.9% of general consumers opted out of the fintech experience due to security concerns.
Other countries around the world are gradually addressing this issue by adopting the European-based General Data Protection Regulation (GDPR) and data sovereignty regulations. Indonesia can certainly study this move and decide if a similar adoption strategy would be reasonable.
It is a highly critical time to direct the growth of fintech and the transformation journey of financial institutions towards an environment where reliable security measures are prioritized.
If consumers are worried, both financial services and products of all kinds – regardless of the producers – would not be able to survive in the marketplace, thus lagging the digital growth of a country. This growth trend then pushes traditional financial organizations to transform themselves in order to catch up with fintech companies and adopt similar capabilities to attain value in the market.