Fintech Payment is an innovative concept in the financial industry that combines information technology with financial services to facilitate efficient and secure payment processes. This article will delve into the definition of Fintech Payment, its benefits for society, and the underlying mechanisms of its operations.
With the presence of Fintech Payment, financial transactions can be conducted easily and quickly, opening up new opportunities for the digital economy in this modern era.
Definition of Fintech Payment
Fintech Payment is a financial technology that provides users with convenience in various payment transactions, ranging from daily bills, online shopping, to offline transactions conducted directly on-site.
For example, when shopping at a supermarket and using a Fintech payment application, there’s no need to worry about carrying cash or dealing with change, as the application provides a practical and efficient solution for managing payments without the need for physical currency.
Types of Fintech Payment
In Indonesia, the Fintech payment sector is subject to strict regulations overseen by Bank Indonesia (BI) and the Financial Services Authority (OJK). The focus of this payment technology is to facilitate payment transactions between customers and merchants.
Various business models in payments have been established with specific rules. For new business models, authorities have a “sandbox” mechanism to test before implementing new regulations.
Here are explanations of some popular Fintech payment products and their business models:
Electronic Money
Electronic money, according to BI, is a payment tool that allows easy and quick transactions without using cash. It comes in two forms: chip-based and server-based. Chip-based electronic money includes products like e-money purchased at convenience stores or banks, used for non-cash payments at toll booths or other locations. Server-based electronic money is a digital application on a mobile phone, used for payments at merchants both online and offline with QR codes.
Digital Wallet
A digital wallet is one of the payment transaction processing providers according to BI. It is an electronic service for storing payment instrument data such as cards and/or electronic money. Additionally, a digital wallet can be used for fund storage and payments. An example is a travel application providing electronic money services to store remaining balances or bonus points from purchases, usable for subsequent transactions.
Payment Gateway
Payment gateway falls under the category of payment transaction processing providers regulated by BI. It is an electronic service that enables merchants to process payment transactions using payment tools such as cards, electronic money, and/or bank payment services. Payment gateway services connect to the merchant’s system, whether on a website or a mobile application. These services incur transaction fees and/or subscription fees for system usage.
Paylater
Paylater is a payment service that operates through a loan mechanism, often referred to as “credit without a credit card.” It works similarly to a credit card, allowing users to purchase goods and pay in installments. Paylater services are regulated by the Financial Services Authority concerning technology-based lending services.
Paylater implementation is not limited to e-commerce but has also been applied to other consumer applications such as online travel and online education services.
Fintech Payment Development in Indonesia
The Fintech industry in Indonesia has experienced rapid growth since 2006. According to a report from Indonesia Baik, a platform under the Ministry of Communication and Information, Fintech users reached 7% in that year, increasing sharply to 78% in the next ten years.
Not only users but the number of Fintech companies has also significantly increased. In 2006, there were only six Fintech companies, but by May 2022, this number had risen to 352 companies affiliated with the Indonesian Fintech Association (AFTECH).
According to AFTECH’s report, the main market for Fintech companies is micro, small, and medium-sized enterprises (MSMEs). As much as 62% of Fintech providers serve MSMEs, with 42% of them recording transaction values from MSMEs exceeding Rp80 billion in 2021.
In the forecast by Bank Indonesia (BI), by the end of 2022, total digital banking transactions are estimated to reach Rp48 quadrillion, including transactions conducted by Fintech in the payment system sector. This underscores the crucial role of Fintech in promoting financial inclusion in Indonesia through digital financial services.
The rapid growth of Fintech Payment in Indonesia in recent years, supported by advancing technology and high internet penetration, has made digital payment services increasingly popular among the public.
Various Fintech Payment companies have emerged, offering innovative and efficient payment solutions such as digital wallets, electronic money, and payment gateways.
Clearer regulations from Bank Indonesia (BI) and the Financial Services Authority (OJK) have provided a more stable foundation for the Fintech Payment industry in Indonesia. Additionally, public acceptance of this technology has increased due to the ease and convenience of non-cash transactions.
Fintech Payment plays a crucial role in supporting financial inclusion, especially for the MSME sector, which is accommodated by digital payment services to optimize their business processes.
The high interest and demand from the public, coupled with full regulatory support, create a conducive environment for the growth of Fintech Payment in Indonesia. This development positively impacts the expansion of financial access for individuals who were previously underserved by traditional banking services.
However, alongside this growth, Fintech Payment companies are also required to enhance security and user data protection to maintain consumer trust in using their services.
In summary, Fintech Payment has brought significant changes to the payment and financial world. By leveraging information technology, this service has facilitated various transactions for the public, from bill payments to online shopping. The speed, convenience, and security offered by Fintech Payment benefit both customers and merchants. With technology continually advancing and regulations maturing, the future of Fintech Payment is expected to be even brighter, bringing positive impacts to digital economic growth and financial inclusion in Indonesia.
