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Embracing the Future:
The Rise of Innovative Risk Decisioning Platforms in Indonesia

Cassidy Bellville
October 16, 2023

A New Era of Credit Risk Management Unfolds

As we navigate our way into the future, it becomes evident that a significant transformation is underway in the financial realm. Projections indicate that global fintech revenue will experience a sixfold increase between 2021 and 2030, reaching an impressive US$1.5 trillion annually. Notably, the Asia-Pacific region will play a dominant role in this growth, constituting 40% of the global fintech revenue, equivalent to a substantial US$600 billion per year, as reported by Boston Consulting Group (BCG) and QED Investors.

As part of this transformation, Indonesia stands at the cusp of a financial revolution. Innovative risk decisioning platforms are reshaping the lending landscape, offering detailed insights to lenders and empowering borrowers in unprecedented ways.

These platforms harness the power of data as well as machine learning and artificial intelligence, tapping into a plethora of alternative data sources, ranging from social media activities to mobile phone usage patterns1. This approach provides a more holistic assessment of an individual’s creditworthiness, transcending beyond traditional data points.

Why does this matter? Understanding creditworthiness is pivotal to lending. It enables lenders to mitigate risk, customize loan offerings, and identify potential defaults at an early stage. Remarkably, research indicates that the utilization of alternative data can curb default rates by up to 45%.

Moreover, these platforms are democratizing access to credit. By considering alternative data and incorporating automated, AI-powered decisioning, they are enabling lenders to evaluate the creditworthiness of individuals lacking a formal credit history. This is particularly significant in Indonesia where approximately 30% of adults are financially excluded due to the absence of a credit history.

So, what fuels this trend? A combination of several key factors.

  • Firstly, Indonesia’s fintech industry is experiencing rapid growth. Technological advancements have led to the emergence of new platforms and innovative methods of delivering financial services.
  • Secondly, Indonesian banks and multi-finance companies are making substantial investments in Peer-to-Peer (P2P) lending platforms. These platforms offer new channels for loan distribution and widen the access to credit.
  • Additionally, the Indonesian government is playing a crucial role in this transformation. They have established a robust fintech ecosystem with stringent regulations and advanced infrastructure technology to facilitate SME financing.

However, as with any revolution, there are challenges to overcome. Ensuring data privacy and security is paramount, necessitating a delicate balance between leveraging rich data sources and respecting individuals’ privacy rights. As of July 2023, there is no specific data protection authority overseeing data protection in Indonesia. “However, the PDP law puts forward the role of the Government of Indonesia in actualizing the implementation of personal data protection. The PDP Law calls for the creation of a Personal Data Protection Commission (Komisi Perlindungan Data Pribadi) as the body responsible for implementing the PDP Law.

The rise of innovative risk decisioning platforms in Indonesia signifies a paradigm shift. These platforms are revolutionizing how lenders assess creditworthiness, fostering financial inclusion, and propelling the country’s fintech industry forward. The future of lending in Indonesia is indeed promising… will you be at the heart of this exciting transformation?

The Provenir team will be attending the World Financial Innovation Series (WFIS) event in Indonesia as a Silver Sponsor! Meet us at the event, where we’ll showcase cutting-edge solutions to empower your financial journey. Book a meeting here.

Meet us at the World Financial Innovation Series event.

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