Ins and Outs of Digital Financial Innovations that You Must Know
Financial Digital Innovations or Inovasi Keuangan Digital (IKD) become proof that the technological development in the Indonesian financial sector is increasing steadily. The speed of this development is shown with the abundance of IKD providers that are recognized by the Financial Services Authority (Otoritas Jasa Keuangan/OJK) through the Digital Financial Innovations Group (Grup Inovasi Keuangan Digital/GIKD). Despite its level of advancement, the Indonesian government expects the birth of new IKD providers in this country.
The Definition of Digital Financial Innovations
To understand more about IKD, let us start with its definition. According to the Financial Services Authority Regulations ( Peraturan Otoritas Jasa Keuangan/POJK) No. 13/POJK.02/2018, Digital Financial Innovation is any form of business process, business model, and financial instrument reforms that give new added value to the financial service sector by involving a digital ecosystem.
In short, IKD performs transformation to companies in the finance world by using certain instruments. The involved environments in the implementation of IKD are authority, providers, consumers, or other parties that use the digital platform in doing financial transactions. Of course, all parties should cooperate so that IKD can bring significant benefits and impacts to Indonesian society.
The Scope of Digital Financial Innovations
Certainly, every financial sector has its own scope, which includes Digital Financial Innovations. Types of activities within IKD’s scope are:
- Repayment of ongoing transactions
- Capital collection from several fund sources
- Investment management
- Fundraising and distribution
- Management of all forms of insurance
- Supporter of all forms of national market
- Supporter of other digital finances, and/or
- Other forms of financial services activities
Even so, a single IKD provider can perform not all activities from the list above. Other IKD providers only focus on providing one type of service from the previous list. However, one definitive thing is all of the financial activities in the list are included in IKD’s scope.
At a glance, IKD appears to be similar to financial technology (fintech). The comparison itself is not entirely wrong, considering that fintech is a financial sector development system that uses digital technology, such as websites or other digital finance applications. The difference is that fintech focuses on service provision, as IKD is a financial activity process.
Criteria of Digital Financial Innovations
Of course, not all persons who run IKD companies can be called IKD providers. According to OJK, an IKD must meet seven important criteria:
- Being innovative. This means that an IKD should always develop new ideas to support the development of IKD in Indonesia. Aside from being innovative, an IKD provider should always be future-oriented and capable of being present at all times.
- Utilizes technology. An IKD must utilize information and communication technology in performing all forms of financial transactions. Furthermore, technology itself should be the main platform in providing financial services to consumers.
- Being inclusive. Based on the previous explanation, an IKD is expected to bring benefits to society. For that reason, it is important for the IKD provider to provide financial literacy without judging its consumers’ backgrounds. Aside from financial technology advancement, Indonesian society is also expected to be financially intelligent.
- Capable of widespread use. Still related to point C, IKD application or website must be able to be widely used by society. If a user is having difficulty accessing them, it means that the IKD has not attained a high level of usefulness value.
- Capable of integration. This means that all IKD instruments must be able to be integrated or used simultaneously with the previous versions of financial services. For example, an IKD provider that uses the digital transaction method as one of its services should also provide other payment services such as debit or credit cards.
- Uses collaborative approach. In creating and running IKD, there should be several involved parties to support the advancement of the financial instrument so that it can bring more benefits to society.
- Protects consumers’ data. This should be a priority criterion for IKD providers considering the existing risks of consumers’ data theft and misuse. For this reason, OJK expects all IKD providers to be able to provide consumer protection services so that all damages can be prevented.
Of course, it is not easy for IKD providers in managing and running Digital Financial Innovations that can bring significant results to society and realizing Indonesia’s vision of a national digital transformation. For that reason, AdIns is present through the CONFINS service that can help the development of IKD companies. Contact us immediately to receive complete information regarding this service!