Abstract
Financial inclusion is a term that is used to describe easy access of financial products and services for everyone. G20 countries, including Indonesia, show high commitment to accelerate financial inclusion. Financial inclusion also facilitates the achievement of 17 Sustainable Development Goals. Fintech or digital financial technology is one of the most recent innovations in financial industry. It has grown at a rapid speed in the recent years. Fintech provides products and services with low costs, better quality, and stable financial landscape. With its flexibility and simplicity, Fintech may facilitate the offering of financial services to people who are “unbanked,” or to small business at low cost and low risk. Hence, this chapter thoroughly discusses FinTech's role in supporting financial inclusion in Indonesia. Indonesia is one of the G20 countries that is committed to conduct financial inclusion. Specifically, this chapter elaborates financial inclusion, Fintech in Indonesia, and role of Fintech in supporting financial inclusion in Indonesia.
TopFintech As An Innovation In Financial Industry
Fintech or digital financial technology is one of innovations in financial industry. Fintech is a combination between financial service and technology that changes business model from conventional model to technology-based model. In conventional model, customer needs to go to the bank and deposit their money directly, while in technology-based model, long distance and real-time transactions can be done.
Fintech emphasizes the ease and economics of costs in capturing, sending, storing and analyzing data in digital form. Fintech utilizes technological innovations such as the internet, mobile phone, and data processing. Fintech has changed the availability of information and has reduced physical transactions and costs in producing and distributing financial products and services.
Fintech emerged when people need information technology in every aspect of their life. Fintech has grown rapidly in recent years because it provides low cost products and services, better quality, and a stable financial landscape. Fintech helps selling transactions and payment systems become more effective, efficient, and economical. Fintech also has better infrastructure, big data, data analytics, and mobile devices.
Fintech benefits its players in simplifying transaction chain, reducing operational cost and capital cost, as well as forming transaction information flows. Fintech startup companies offer more attractive services with more choices than traditional financial companies. With its flexibility and simplicity, fintech facilitates the offering of financial services to people who are not reachable and to small businesses at small costs and risks. In this case, Fintech is able to change the financial system while being able to replace and support the role of formal financial institutions.
Key Terms in this Chapter
OJK: Indonesian Financial Service Authority. It is an independent institution free from external interference, mandated with regulating, supervising, inspecting and investigating the financial services sector.
SNKI: Indonesia national strategy as stated in a document that contains the vision, mission, goals, and policies of inclusive finance in order to support economic growth, accelerate poverty reduction in order to realize the welfare of the Indonesian people.
Fintech: A new technology that aims to improve and automate the delivery and use of financial services.
SNLKI: A guidelines for OJK or financial institutions in Indonesia in conducting financial education activities to improve public financial literacy.
Financial Inclusion: A condition where individuals and business have access to useful and affordable financial products and services that meet their needs.
Peer-to-Peer Lending: The practice of lending money to individuals or businesses through online services which match lenders with borrowers.
Unbanked: Individuals who do not use banks or banking institutions in any capacity.