The phenomenon of online gambling in Indonesia remains persistent, posing significant challenges to financial services and public welfare. Despite its illegality, online gambling continues to attract a high volume of users, many of whom turn to fintech platforms to fund their betting activities. This situation has opened a new chapter in the fight against online gambling, necessitating the involvement of fintech companies in Indonesia to curb the misuse of their services.
Recent Google Trends data reveals an alarming increase in public interest in gambling-related keywords. From January to the first week of October 2024, the keyword “slot” reached a search interest score of 82—a sharp rise from previous years. In 2021, this score was only 10; it increased to 40 in 2022 and reached 60 in 2023. This trend highlights the growing popularity of gambling, underscoring the urgency for fintech platforms to implement stricter controls to prevent loans from being misused for gambling purposes.
Data from the Financial Reporting and Analysis Centre (PPATK) also reflects this rise in online gambling activity. In 2021, the number of gambling-related transactions reached 43.6 million, surging to 104 million in 2022. By the end of 2023, this figure had climbed to 168 million. The alignment between Google search trends and PPATK transaction data paints a clear picture: online gambling activity is increasing, and proactive intervention by fintech platforms is necessary to curb it.
The Role of Fintech in Lending and Its Potential Misuse
An alarming revelation from PPATK indicates that some peer-to-peer (P2P) lending and “pay later” fintech users are redirecting borrowed funds for gambling. Andrisyah Tauladan, Director of Corporate Communication of the Indonesian Joint Funding Fintech Association (AFPI), noted that this trend is not uncommon; individuals may source gambling funds from various financial avenues, including banks, multi-finance, cooperatives, and both legal and illegal online loans.
The economic impact of this misuse is severe. A gambler who accumulates debt to fund their gambling habits risks financial ruin, which could lead to defaults, impacting fintech and other financial institutions. However, despite these risks, the sector has shown resilience. According to the Financial Services Authority (OJK), the percentage of non-performing loans in the P2P sector (TWP90) was only 2.53% in July 2024—a significant improvement over July 2023’s figure of 3.47%.
Positive Trends in Indonesia’s Fintech Sector
Despite the challenges posed by online gambling, Indonesia’s fintech P2P lending market continues to show positive growth. In December 2023, month-on-month growth in loan disbursements was modest at 0.48%. However, as 2024 progressed, growth accelerated, with an impressive 3.47% spike in May 2024 and further increase to 3.69% by July.
This positive growth trend may be attributed to fintech stakeholders’ commitment to rigorous customer screening and fraud detection measures, which prevent misuse of loan funds. According to Abynprima Rizki, Director of Marketing, Communication, and Community Development of the Indonesian Fintech Association (Aftech), the association is actively encouraging fintech companies to ensure responsible product usage and to prevent their services from being co-opted for illegal transactions, including online gambling.
To strengthen these efforts, Aftech urges fintech companies to improve corporate governance and implement disaster recovery plans, including fraud detection systems. This proactive approach is essential given that various fintech services—such as e-wallets, P2P lending, and payment platforms—are at risk of association with gambling activities if not carefully monitored.
Collaboration and Future Outlook
Aftech is not working alone in its mission to combat online gambling. In partnership with the Financial Services Authority (OJK), Bank Indonesia, and the Indonesian Payment System Association (ASPI), Aftech fosters collaborative efforts to enhance regulatory compliance and mitigate risks. Such collaboration is crucial for boosting public trust in the fintech sector and reinforcing the integrity of Indonesia’s financial services landscape.
While the challenge of online gambling persists, the fintech lending sector in Indonesia demonstrates resilience and a promising growth trajectory. According to recent OJK data, the sector’s positive growth trend indicates the effectiveness of current management strategies and points toward a sustainable future.
The Road Ahead for Fintech in Indonesia
As the fintech industry continues to grow, its role in addressing social issues like online gambling becomes increasingly significant. For startup founders and investors looking to engage in responsible investment opportunities, Indonesia’s fintech sector offers both growth potential and social impact. By leveraging innovative technologies and robust governance measures, fintech companies in Indonesia can continue to take charge of creating a safer, more accountable financial landscape.
At Skystar Capital, we take pride in being the first backers of visionaries. With deep local expertise and an extensive network in the Indonesian market, we are ready to support your innovative solutions to drive Indonesia forward. Submit your business proposal here!
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