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Regulating the Growth of Electronic and Digital Banking Services 

by Maria Sagrado, Frederick Simanjuntak

Published: December, 2020

Submission: December, 2020


With the rapid development of technology and the rise of new finance products and players in the fintech industry, banks are pushed to produce new products and innovative services in order to serve their customers and keep abreast of the behaviour of consumers who appreciate the convenience of digital services. In response to this, the Financial Services Authority (Otoritas Jasa Keuangan -- OJK) has issued OJK Regulation No. 12/POJK.03/2018 on the Organization of Digital Banking Services by Commercial Banks (“OJK 12/18”). OJK 12/18 has 10 chapters and covers electronic banking services and digital banking services. It explains the types of electronic and digital banking services that can be provided and the requirements that must be complied with before introducing the services and during the operation of the services. The following are several key provisions of OJK 12/18.

The Scope of the Regulation

OJK 12/18 distinguishes between electronic banking services and digital banking services. a. Electronic banking services: services provided by a bank to obtain information, to communicate and to conduct banking transactions through electronic media. b. Digital banking services: Electronic Banking Services developed to optimize the utilization of customer data in order to provide customers services faster, more easily and effectively (customer experience), which can be accessed fully independently by customers while ensuring security.

Applicable Sanctions and Ceasing Activities

The OJK may instruct a bank to cease providing electronic or digital banking services if, according to its evaluation, the services: a. are not in line with the plan to engage in new activities submitted to the OJK or the approval or recording of the products by the OJK; and b. could potentially have a negative impact on the performance and reputation of the bank concerned. In addition to the above, failure to comply with certain requirements under OJK 12/18 may result in the imposition of the following administrative sanctions: (a) a written warning; (b) a downgrading of the bank’s soundness level by lowering the bank’s governance level when reviewing the bank’s soundness level; (c) a prohibition against launching new products or engaging in new activities; (d) a suspension of certain business activities; or (e) the inclusion of the members of the Board of Directors, Board of Commissioners and executive officers in the list of failed a fit and proper test candidates. The sanctions in (b) to (e) above can be imposed without first a written warning being served. Fines may also be imposed for failure to submit reports in a timely manner. The fine for each report is IDR 1,000,000 per day of delay, capped at IDR50,000,000 for failure to submit the report more than 1 month after the due date. The imposition of fine does not waive the bank’s obligation to submit the relevant report.

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