Policies on Digitalization in Indonesia’s Financial Services Sector:

Its Impact on Access to Finance and Protection of Personal Data

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In the era of digital acceleration, various sectors must adapt quickly so as not to be left behind, especially the financial and banking sectors. Before the Covid pandemic, the banking industry disruption had occurred. A total of 2,400 bank branch offices closed in 2019, and only 1,100 opened new branch offices. This shows that there were 1,300 bank branch offices missing that year. During a pandemic, research from the Indonesia Banking School shows that the banking and financial sectors are among the main sectors, where consumers are turning towards digitalization. In addition, the development of innovations in the field of financial technology has also encouraged the banking sector to change into a moredigital form versatile. The term neobank refers to a branchless digital bank that seems to be the answer to the changes that are currently happening. Currently in the world there are a total of 170 neobanks, of which 36 are in the Asia Pacific region. In Indonesia, this type of bank has been initiated under the name digital bank.

Regulators responded to this innovation in order to ensure an industrial climate that remains healthy, safe, and of course, sustainable. The Financial Services Authority (OJK) together with banking associations compile a blueprint for digital banking transformation, covering aspects of data protection, collaboration between financial and non-financial institutions, risk management, technology use, and institutional governance (Bisnis.com, 9 April 2021). OJK will divide digital banks into two types, namely: a new entity that is fully operational as a digital bank, and the transformation of a conventional bank into a digital bank (Republika.id, 21 April 2021). This regulation will be in the form of a Financial Services Authority Regulation (POJK), which is targeted to be completed in the first semester of 2021. One of the components regulated in this regulation is related to the requirements for establishing a digital bank. To establish a digital bank, OJK will conduct assessments in terms of business models, technology, corporate governance and IT, IT risk management, HR competencies to business plans.