eIndonesia has emerged as an attractive destination for digital businesses in Asia-Pacific (APAC), showcasing a strong and expanding digital economy.
According to the 2024 e-Conomy report by Google, Temasek and Bain and Company, Indonesia’s digital economy will reach a gross merchandise value (GMV) of US$90 billion in 2024, up 13% from the previous year. By 2030, this value is projected to soar to US$200-360 billion, solidifying the country’s position as Southeast Asia’s biggest and most dynamic digital economy.
Within this landscape, digital financial services play a critical role, exhibiting strong growth. In 2024, the gross transaction value (GTV) of digital payments is forecasted to hit US$404 billion, marking a 19% year-over-year (YoY) growth.
Other segments, including digital wealth and digital lending, are also showing remarkable performance, with assets under management (AUM) and loan book balances increasing by 32% and 27% YoY, respectively.
Despite this strong growth, businesses in Indonesia are facing increasing regulatory oversight, especially in areas like anti-money laundering (AML) and know-your-customer (KYC) compliance.
Rules and standards are also changing to keep pace with shifts in how customers behave and interact with organizations. These factors are compelling businesses to increasingly leverage technologies like electronic KYC (eKYC).
AML/CFT regulations in Indonesia
Indonesia’s AML and countering the financing of terrorism (CFT) frameworks are governed by several key laws that apply across industries, including banking, insurance and fintech, but also real estate and even art dealerships.
Three major regulators oversee AML and CFT compliance in Indonesia: Bank Indonesia (BI), which ensures financial stability; the Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK), the country’s financial intelligence unit, responsible for collecting, analyzing, and disseminating information related to suspicious financial transactions; and the OJK, or Indonesia’s Financial Services Authority, which is responsible for regulating and supervising the financial services sector.
Key AML/CFT regulations in Indonesia include Law No. 8 of 2010, which lays the foundation for combating money laundering by outlining compliance requirements for businesses, as well as Government Regulation No. 74 of 2015 and Otoritas Jasa Keuangan (OJK) guidelines, which provide detailed compliance procedures, transaction reporting protocols and risk-based supervision guidance.
These legislations are mandating businesses to implement stringent measures, including conducting customer due diligence (CDD), monitoring transactions in real time, maintaining accurate records, and training staff to recognize and report suspicious activities.
KYC is a cornerstone of Indonesia’s AML/CFT compliance framework, allowing institutions to verify the identities of their clients and ensure that they are not involved in illegal activities.
Under BI Regulation No.3/10/PBI/2001, businesses must implement robust identity verification methods and collect identity verification information including full name, identity document number, residential address according to identity documents, place and date of birth, as well as biometric data or signatures. Accepted forms of identification include government-issued documents such as Identity Cards (KTP), passports, and driver’s licenses (SIM).
The rise of eKYC
With the rise of fintech, Indonesia has adjusted its regulatory frameworks to support eKYC, allowing businesses to verify the identity of a customer remotely using digital technologies.
OJK’s regulation POJK No. 23/POJK.01/2019, for example, is designed the enhance the effectiveness of AML/CFT measures in the financial sector, and includes provisions related to eKYC processes. The regulation emphasizes the importance of digital identity verification and enhanced due diligence to prevent money laundering and terrorism financing, highlighting the need for financial institutions to implement robust identity verification systems and document handling processes.
Law No. 11 of 2008 on Electronic Information and Transactions, meanwhile, governs the use of electronic information and transactions in Indonesia, providing a legal framework for electronic transactions and digital identity verification, which can be applied to eKYC practices. This law ensures that electronic documents and transactions are legally recognized and provides guidelines for secure and transparent digital interactions.
Finally, Law No. 27 of 2022 on Personal Data Protection is Indonesia’s comprehensive legal framework for personal data protection. The law emphasizes the importance of data privacy, security, and compliance for all entities handling personal data, including financial institutions that implement eKYC systems.
This conducive landscape has led to the advent of a burgeoning eKYC ecosystem, which now comprises prominent names such as Innov8tif and ASLI RI. Innov8tif provides the EMA eKYC solution, which uses artificial intelligence (AI) for identity verification, while ASLI RI specializes in biometrics, serving major clients in Indonesia including Bank BRI, OVO and Kredivo.
A digital infrastructure to support eKYC in Indonesia
Indonesia’s efforts to modernize identity verification and support eKYC are further exemplified by its work in developing the Identitas Kependudukan Digital (IKD), or Digital Population Identity.
Accessible via a smartphone app, IKD digitizes key identity documents such as identity cards, family cards, and birth certificates, allowing users to verify their identity online without visiting branch offices. This innovation enhances administrative efficiency, reduces costs, and promotes inclusivity, especially for remote or underserved communities.
IKD, which is integrated with several key platforms, including SatuSehat digital health, INA Ku public services and INA Gov civil servant portal applications, and the Wondr digital bank, is said to be used by over 12.3 million people.
The government is actively pushing for greater adoption, conducting public education campaigns and establishing adoption posts at branch offices down to the village level. It’s also collaborating with state-owned and private companies to promote IKD adoption among employees.
IKD is part of the broader Identification (ID) for Inclusive Service Delivery and Digital Transformation in Indonesia Project, which aims to close registration gaps in underserved regions, strengthen cybersecurity and modernize information and communications technology (ICT) infrastructure, and develop a national eKYC platform and digital identity application in the country. The initiative is in part financed by a US$250 million loan from the World Bank.
