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Indonesia cracks whip on mushrooming illegal fintech firms

[JAKARTA] Indonesian regulators struggling to keep pace with the mushrooming fintech startups operating without a license have turned to the police and public for help in tracking them.

The Financial Services Authority, known as OJK, has shutdown 826 illegal startups this year alone, Tongam L Tobing, chief of investment watchdog at the regulator, told reporters in Jakarta on Friday. These firms operated across platforms such as websites, mobile apps and social media, making it difficult for authorities to detect them, he said.

Indonesia, home to more than 260 million, has emerged as a prized market for fintech startups as about 90 per cent of its population don't carry credit cards and majority has no access to formal banking services. The nation's internet economy is the fastest growing in the region and is poised to expand to US$100 billion by 2025, according to a report by Google and Temasek Holdings.

The illegal fintech firms often charged exorbitant interest rates and resorted to unethical recovery practices considered criminal in nature, National Police spokesman Dedi Prasetyo said. The police have come across cases of borrowers being threatened and persecuted, driving them into fear and depression, he said. The public should not fall prey to offers of easy loans and not share personal data with fintech firms operating without licenses, he said.

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"What makes the fintech firms thrive is because the society is still easily tempted by offers of loans with less hassles," OJK's Tobing said.

While the origin of the 42 per cent of 1,230 fintech firms closed down by the regulator since it began a crackdown last year was not known, 22 per cent of them had their servers located in Indonesia with 15 per cent in the US, Mr Tobing said.