The development of FinTech users continues to grow from year to year. Based on the World Bank, FinTech users were originally 7% in 2007, grew to 20% in 2011, then increased to 36% in 2014, and in 2017 yesterday it had reached 78% or recorded as many as 135-140 companies, with the total value of FinTech transactions in Indonesia in 2017 is estimated at IDR 202.77 trillion.
Online loan in Microfinancing is a FinTech service that provides financial services for the lower middle class to help with their daily lives and finances. Because people from this economic group mostly do not have access to banking institutions, they also experience difficulties in obtaining venture capital to develop their businesses or livelihoods. Online loan seeks to bridge this problem by channeling business capital directly from lenders to prospective borrowers. The business system is designed so that returns are competitive for lenders, but attainable for borrowers. One of the startups engaged online loan is Amartha, which connects rural micro-entrepreneurs with online investors.
This FinTech helps people who need access to finance to meet their needs. With this FinTech, consumers can borrow money more easily to meet various life needs without having to go through the convoluted processes that are often found in conventional banks. One example of a FinTech engaged in the field of money lending is AwanTunai, a startup that provides digital installment facilities safely and easily.
Behind the convenience and practicality it offers, not a few people use this online loan product unwisely. In fact, when compared to conventional loans, online loans have interest rates that tend to be higher and shorter installment tenors. On online loans, administrative costs are not transparent. As a result, risky customers have to pay debts greater than the initial agreement. In addition, customers also have to pay late fee fees and other fines which incidentally do not make sense.
As many as 78 percent of online loan servers are located abroad. In fact, based on data from the Indonesia Ministry of Communication and Informatics, as many as 44 percent of illegal peer 2 peer lending (P2P) servers are unknown in which country. Most of the servers are not in Indonesia. There are only 22 percent in Indonesia, 44 percent is unknown because the offer can be via social media, SMS, or in person. There are also from America, Singapore, China, etc. How is it possible for them to carry out activities with overseas centers, but in Indonesia they have debt collectors or offices to do billing.
The existence of this online loan is a polemic because of low financial literacy in Indonesian society. This is of course at risk for making online loan debtors trapped in a debt bondage that is too heavy to be unable to pay their installments.
The most dangerous is the spread of borrower's personal data. This illegal loan request access to all data and contacts on the cellphone. In the moment of permitting, that is where our weakness emerges. The data will be used when the loan matures. They will terrorize, intimidate, and threaten.
In Indonesia there are also rampant cases of illegal loans which cause huge losses to the state and society. It is feared that this will reduce public trust in fintech lending, even though the existence of legal fintech also brings benefits. One of the efforts made by the authorities to protect the public from illegal loans is to block at least 3,193 illegal fintechs, then announce them to the public.
We know that access to banking among the people in Indonesia is still limited. Online loan is a fast funding solution. This is what can be considered a double-edged sword. Can provide funding quickly, but if you don't know and don't understand how loans work and are implemented, it can be a burden to the community.
Education is very important for society. Financial services authorities play a very large role in implementing and regulating online loan actors. Financial services authorities also play a role in facilitating so that fintech and online funding players can quickly obtain licenses, so that they can be properly regulated and responsible for their operations.