About the author:
Ronald Molenaar is the Country Manager of ADVANCE.AI in Indonesia. With over 20 years of experience in tech, finance, and fintech in Indonesia and across the world, Ronald understands the needs of fast-growth businesses, whether it's scaling, expanding across borders, or adapting to new ways of working as digital transformation accelerates. Pak Ronald, as he is often known among ADVANCE.AI's customers, is always exploring ideas with internal teams as well as with prospects and customers on how we can elevate businesses and people together in a better, safer, and more financially inclusive world.
Indonesia is moving swiftly ahead with its digital transformation efforts to advance digital and financial inclusion. The Indonesia Payment System Blueprint for 2025 introduced by Bank Indonesia as a framework to encourage banking digitisation provided further acceleration. However, as the digital economy continues to grow, Indonesians are becoming increasingly worried about financial crime. Individuals and companies have been impacted by fraud, particularly in the last few months.
Recognising it needs to build public trust, the government and other industry stakeholders have been rolling out new initiatives and regulations to protect the consumer and build public trust in digitisation.
In September 2022, the government introduced the country's first Personal Data Protection (PDP) law. And in October 2022, Indonesia's Financial Inclusion Month, the Financial Services Authority of Indonesia (OJK) further unveiled three innovations aimed at strengthening the public’s trust in the digital finance industry or digital trust system, including digital financial literacy modules, chatbot customer support technology, and capacity building for OJK employees.
These efforts all point towards the country's focus on safeguarding consumers, and banks and financial companies should follow suit with more concrete steps towards consumer protection and building consumer confidence, especially if there aren't any strategies in place yet.
Particularly with increasing fraud cases, scams, and a series of data leaks that saw the personal information of millions leaked online recently, Indonesian consumers are understandably worried about how their information is being used by companies. To protect Indonesians, OJK recently implemented regulations that made it mandatory for insurance companies to conduct electronic Know Your Customer (eKYC) verification for new and existing customers.
A secure eKYC process, built with a trusted partner, not only protects companies against fraud, corruption, money laundering and terrorist financing, it also helps assure consumers that their identities are not being misused by others for illegitimate or fraudulent purposes.
And eKYC delivers more than just consumer protection — it can also enhance the customer experience. In fact, we’ve even observed companies outside the financial industry such as hospitals and hotels adopting eKYC processes to more quickly and accurately verify the identities of their customers during admissions and check-ins. This has helped staff increase their productivity while ensuring shorter wait times for hospital patients and hotel guests.
Another example is ADVANCE.AI's customer, digital asset investment platform Nanovest which worked with us to create a seamless onboarding process that can be completed within 60 seconds. The quick, user-friendly, and most importantly, secure process appeals to young, digitally-savvy investors who are used to accessing digital goods and services in an instant – helping Nanovest maintain low drop-offs and high conversions.
While eKYC at the onboarding stage is effective, businesses need to note that bad actors can still attack afterwards. In fact, a recent fraud survey revealed that more that half of corporate fraud incidents were detected via whistle blowers rather than a detection system. Consistent fraud monitoring is essential in ensuring consumer protection and maintaining trust; rather than waiting for whistle-blowers, organisations need to consider strategies that not only help safeguard their businesses but also their reputations.
In particular, banks and financial companies need to adopt measures that take into account the ever-evolving nature of fraud, to provide consumers the assurance that scammers are unable to easily use their accounts for illegal transactions.
Here is where ADVANCE.AI’s automated real-time fraud monitoring system Fraud Wall can support businesses. It monitors digital transactions using artificial intelligence (AI) to detect any patterns indicative of fraud, based on constant calibration of analysing customer data and profiles. Businesses get a singular unified view across various customer touchpoints such as e-commerce platforms, kiosks, point-of-sale terminals, ATMs, eMOTO and mobile apps. The proprietary AI used in Fraud Wall, known as Transaction Risk Scoring, will assign a score to the data pulled so that businesses can route transactions based on their risk appetite. This provides businesses with better control over fraud monitoring and prevents high-risk transactions from happening.
Fraud Wall is particularly helpful for digital merchants and acquirers that need to ensure transactions are safe from fraudsters. Curious how it works? Book a complimentary consultation session with our team and find out for yourself.
As more Indonesians gain the confidence to use digital financial services, they aren't just looking for greater access to credit, but also peace of mind. Banks and financial companies that can provide a tailored, consultative approach, will differentiate themselves from the competition and win the trust of their consumers.
Alternative data solutions, such as ADVANCE.AI's Toko Score, can provide the insights needed to help banks and financial companies better understand their consumers. Toko Score works by analysing the risk profile of prospective borrowers based on their activities on Indonesian e-commerce platform, Tokopedia. Integrating this score with our own alternative credit scoring system, we help businesses verify identities and create a fuller, more comprehensive picture of the consumer.
Besides helping financial institutions create risk profiles to better understand customers' creditworthiness, alternative data solutions also provide banks and financial companies insights that can help formulate tailored loans and repayment strategies that work for the individual.
Ultimately, greater financial inclusion will come down to the level of confidence consumers have in an increasingly digital financial services industry. With the PDP law and the other initiatives, we are excited to see Indonesia expanding its efforts to build consumer confidence in digitisation. We believe what the industry and government are doing signifies a positive outlook for Indonesia and the nation's goals for greater financial inclusion.
ADVANCE.AI, with our services in identity verification, fraud management, and alternative data solutions, is committed to supporting businesses in providing technological solutions that build confidence seamlessly across the entire consumer journey.
Contact us today to learn how ADVANCE.AI can be your partner for this ongoing digital journey in Indonesia.