Indonesia revamps banking rules to spur digital transformations

DIGITAL BANKING - JAKARTA. Indonesia has revised banking regulations to push lenders to speed their digital transformations, the financial regulator said on Friday, as digital banking booms in Southeast Asia's largest economy.

The regulations unveiled on Thursday will take effect at the end of October and set out requirements for digital banks, ranging from data protection for customers to employing executives versed in technology.

However, there were no additional rules for digital banks to follow as compared with regular banks, a step the regulator said was intended to speed up digital adoption.

"The pandemic has made digital transformation in the banking sector into an inevitability," Heru Kristiyana, the top banking supervisor of Indonesia's Financial Services Authority (OJK), said in a statement.

"The OJK does not dichotomise banks with existing digital services, incumbent banks that have transformed into digital banks, and new, full digital banks. After all, a bank is a bank."

In a document accompanying the new rules that provided answers to frequently asked questions, the regulator commented on acquisitions of existing banks by tech firms in order to transform them into digital banks.

Such acquisitions will support the regulator's efforts to drive consolidation in the banking industry, it added.

Investors can also set up a new digital bank from scratch as long as they meet the rules, it said, including a new minimum capital requirement of 10 trillion rupiah ($692.76 million), or more than three times the old figure.

Competition is heating up among Indonesia's digital banks as stay-at-home orders against the coronavirus pandemic drive more customers to the internet.

Transaction value using banks' digital channels jumped 53% to 3,411 trillion rupiah ($236 billion) in the year to July, central bank data shows.

The biggest lenders, Bank Central Asia and Bank Rakyat Indonesia, are gearing up to launch digital arms this year, while tech firm Gojek's Bank Jago and Singapore-based Sea Group's SeaBank Indonesia have already launched.