- In an effort to further anticipate payment default risk in relation to the organization of Buy-Now-Pay-Later ("BNPL") services, the Chief Executive of Banking Supervision at the Financial Services Authority (Otoritas Jasa Keuangan/OJK), Dian Ediana Rae ("Chief Executive"), has emphasized the need for banks to implement adequate risk mitigation mechanisms and to apply the principle of prudence whenever entering into any partnership agreements. Such measures include: 1) Comprehensive partner selection; 2) Regular monitoring; and 3) Periodic performance evaluations.
- In the event that a payment default occurs, the Chief Executive is urging banks to ensure that adequate risk mitigation strategies are put in place, including the establishment of loss reserves for problematic loans and the implementation of certain resolution steps whenever defaults occur.
- Furthermore, the Chief Executive has stated that any banks that function as intermediary institutions and that aim to facilitate BNPL facilities should be organized through channeling or credit disbursement partnership cooperation schemes that are initiated with fintech companies. In this regard, the Chief Executive has stated that said cooperation schemes may ultimately be optimized through increased levels of disbursed credit to micro-, small- and medium-scale enterprises (Usaha Mikro Kecil Menengah/UMKM) and through the leveraging of information technology facilities.
- The Chief Executive is urging banks to ensure that the above-described partnerships are initiated in line with the following factors: 1) Relevant business licenses; 2) Feasibility of partnering with fintech companies; 3) Compliance with consumer protection Regulations; and 4) Adequate risk assessments. Ultimately, any credit that is disbursed through such partnerships may either be associated with production or consumption, depending on the goals of end users and the policies and risk appetites of relevant banks. (ANT)
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