As a Managing Partner at Makarim & Taira S., I have witnessed how regulatory shifts shape industries. Indonesia’s fintech sector underscores the critical need for robust data protection. The Personal Data Protection Law (PDP Law), enacted in October 2022 and concluding its transitional period in October 2024, drives this transformation as fintech companies align their practices with stricter standards.

For fintech companies, the PDP Law is not merely a compliance obligation but a strategic opportunity to foster trust with consumers and regulators. By aligning with global operational standards, fintech firms can navigate this regulatory shift while driving innovation and accountability.

With decades of experience advising businesses in Indonesia—particularly in the fintech and technology sectors—I have seen how laws like the PDP Law reshape compliance strategies.

Indonesia’s Personal Data Protection milestone

The PDP Law—modelled after the European Union’s General Data Protection Regulation (GDPR)—aims to establish a comprehensive framework for personal data protection.

Key provisions include:

Data subject rights: Individuals have enhanced rights, such as the ability to access, correct, and delete their personal data.
Data controller obligations: Companies must obtain explicit consent for data processing, ensure secure handling of data, and appoint a Data Protection Officer (DPO).
Penalties: Non-compliance can result in fines of up to two per cent of a company’s annual revenue or administrative sanctions, including suspension of business licenses.

These measures align with global best practices, offering a more secure environment for data transactions. However, their implementation poses challenges for fintech firms already navigating Indonesia’s complex regulatory landscape, particularly in balancing compliance requirements with operational efficiency.

Implications for fintech companies

The PDP Law introduces transformative implications for Indonesia’s fintech landscape as its scope includes financial data, reshaping how businesses handle customers’ personal, payment transactions and financial data. These implications span across operational processes, cybersecurity, and cross-border transactions, posing challenges but also opening new opportunities for innovation and trust-building.

For instance, the PDP Law raises significant considerations regarding data ownership and liability, and therefore fintech companies must clearly delineate data ownership responsibilities when collaborating with third parties. Issues may arise when multiple parties, such as payment processors and merchants, handle a single transaction involving consumer data.

Nonetheless, the PDP Law suggests fintech companies as data controllers to retain ultimate responsibility for ensuring compliance with the PDP Law, and therefore they must adopt precise data-sharing agreements to avoid ambiguities regarding compliance obligations and potential liabilities in the handling of customers’ personal, payment transactions and financial data.

Also Read: Practical legal advice for navigating Singapore’s data privacy laws

Operational adjustments

The PDP Law requires fintech companies to overhaul their data-handling processes. Firms must establish robust systems for obtaining and managing user consent. For example, digital wallets and peer-to-peer lending platforms must ensure that customers clearly understand how their data will be used before granting consent. This may necessitate investing in new technology to automate compliance processes and developing user-friendly interfaces for consent management.

Strengthened cybersecurity

Given the financial sector’s vulnerability to cyberattacks, the PDP Law’s emphasis on secure data processing pushes fintech companies to prioritise cybersecurity. A notable example is the rapid adoption of automated threat detection systems by leading digital wallet providers in Indonesia, who faced increased scrutiny following high-profile cyber breaches in recent years.

Companies will need to conduct regular audits, encrypt sensitive data, and establish rapid response mechanisms for data breaches. This presents a dual challenge of managing costs while maintaining operational efficiency.

Appointing a Data Protection Officer (DPO)

Under the PDP Law, appointing a DPO is mandatory for companies processing significant volumes of personal data. For fintech startups with limited resources, this requirement could be a strain. However, the DPO’s role is crucial in navigating regulatory compliance and building consumer trust.

Cross-border data transfers

As fintech companies often operate across borders, compliance with rules governing cross-border data transfers becomes critical. For example, several Indonesian fintech firms have had to renegotiate contracts with overseas partners to ensure alignment with the PDP Law’s equivalent protection standards.

Also Read: Dear app developers in Singapore, don’t forget the PDPA

The PDP Law stipulates that cross-border data transfers must ensure equivalent levels of protection or obtain data subject’s consent for the transfer, which may create additional hurdles for fintech companies operating internationally, as payment platforms that process transactions between Indonesian consumers and overseas merchants (or vice versa) may require renegotiating contracts with international partners or adopting localised data storage.

Opportunities amidst challenges

Despite these challenges, the PDP Law offers fintech companies an opportunity to distinguish themselves through robust data governance. Firms that effectively implement compliance measures can enhance their reputation, attract investors, and build long-term customer loyalty. For example, fintech platforms that integrate transparent data handling practices into their user interfaces are likely to gain a competitive edge.

Moreover, aligning with the PDP Law prepares Indonesian fintech companies for potential expansion into markets with stringent data protection standards, such as the European Union.

To navigate the PDP Law effectively, fintech companies should consider the following steps:

Conduct a data audit: Identify and categorise all personal data assets to understand their usage and storage.
Invest in compliance technology: Leverage software solutions to automate data protection processes and monitor compliance.
Train employees: Regular training programs on data privacy and cybersecurity can empower staff to handle sensitive data responsibly.
Collaborate with regulators: Engage proactively with Indonesia’s Ministry of Communication and Information Technology to stay updated on guidelines and implementation standards.

Indonesia’s PDP Law represents a transformative step in the nation’s digital evolution. For fintech companies, it’s not just about compliance but about building a future that prioritises consumer trust and operational excellence. Embracing these regulations offers a pathway to innovation, resilience, and competitiveness, ensuring that Indonesia’s fintech sector remains a vital part of Southeast Asia’s dynamic economy.

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