- 10/09/2020
- Category: Commentaries
As of April 30th, 2020, 161 licensed fintech lending businesses are registered to the Financial Services Authority (Otoritas Jasa Keuangan, OJK)[i]. This number is relatively the same compared to the previous year, which recorded 164 fintech lending business[ii]. The growth of these businesses in Indonesia is the “impact” of online banking emergence as a form of transaction improvement. It offers practicality and easy access to the finance product[iii]. Fintech lending itself, at first, was considered as a small part of banking activity because it only focused on distributing loans.
When asked why fintech lending is currently increasing, we must look at this business’s internal and external dynamics. If fintech lending returns to its primary function as a channel for loan funds, it will usually focus on MSMEs, where the loans are not too large. This will make customers eliminate the loan options from banks that only serve loan funds for MSMEs. Second, customers’ reach can cover almost all people in the country due to internet access support[iv]. With only using a smartphone and ID card number, people can apply for loans through fintech lending apps available on the e-store. In terms of time, the process of disbursing the funds proposed is relatively fast. Also, the number of funds proposed may vary and is not too large[v].
The emergence of the fintech lending business cannot be separated from internet users’ role in Indonesia. The amount of internet users in Indonesia has increased year to year. The latest data from the Indonesian Internet Service Providers Association (Asosiasi Penyedia Jasa Internet Indonesia, APJII) states that 64.8% of Indonesia’s population (171.17 million people) are active internet users[vi]. The correlation is, the increased number of active internet users in Indonesia could be the reason for the increased number of the online-based lending industry.
The aspect of internal strength that responds to external conditions makes the fintech business flourish in Indonesia, as seen from OJK data, which shows an increase every year. As time goes by, the target audience has expanded. Now, customers who can apply for online loans are not only MSME players but also the general public who need loans for personal needs – such as purchasing college devices (laptops and cellphones) and also for vacation.
This narrative raises a social research question. Vacation is not part of the basic human needs. Supposedly, vacation is an activity that can be planned. With careful planning, people can prepare their needs, one of which is funding. On the other hand, debt is a liability that must be paid off. Suppose we look at fintech lending marketing content that encourages borrowing for holiday activities. In that case, it means that business actors are trying to promote irrational actions that are not realized by the borrowers (customers).
Field Research Findings
This research has conducted a preliminary study on several people who are already working (in Jakarta) and found that the “debt for vacation” phenomenon is not unusual. However, this method of owing varies. Most of them claim to use Credit Card (CC) facilities, while others use PayLater services from online travel agencies. This research uses qualitative research methods and data collection by online interviews – to answer the phenomenon of “debt vacation”.
Based on the interviews and data processing results, we found several interesting things that can answer people’s motivations for using debt for a vacation. The “debt option”, or in this research referred to as Delayed Payment Option or DPO, is used due to the favorable return offering. For example, purchasing ticket using specific CC will give you a big discount and zero percent installments. Thus, they will get a sense of security because they can get tickets at a much lower price than when the ticket was purchased using other methods. In other words, they are more likely to go on vacation because they feel the ticket is already in hand. Plus, the ticket they buy are usually refundable, and it makes the customers or the buyers have a greater sense of control.
Another advantage cited by participants in using DPO for their vacation purposes was the ease of transactions and was considered less disruptive to personal cash flows. DPO is considered very helpful, especially for unexpected expenses during vacation trips. Thus, it is not surprising that participants tend to repeat the same behavior because they think there are no negative impacts they experience while using DPO.
Finding Analysis
Some things are quite interesting in this research. In addition to feeling safe because they got the ticket, the research findings also reveal that there is a sense of security in terms of social relations. When we look deeper into the culture that exists in the participant’s friendship, it is known that social factors also influence the behavior of using DPO and online loans. Participants who are in a hedonistic social environment tend to want to position themselves equally and try to follow the trend – one of which is being assisted by DPO to achieve their goals.
The findings of this research can be linked to the Social Acceptance Theory. In short, our desire to be accepted by social groups has the goal of protecting ourselves from weakness. Living in groups will help us achieve our goal of “survival” because working together will cover individual weaknesses and strengthen group advantages. No wonders we – as individuals – will tend to feel safe and protected when we realize that we are part of a group[vii]. This logic can be used in the participants’ social relations studied in this research, where they realize that their environment has characteristics that shape themselves.
Technological facilities and conditions of social relations in the field can mutually influence decision making. The emergence of fintech lending startups is high. They also exist as a financing option with much easier prerequisites than conventional lending. Supposedly, their presence should be accompanied by the borrower’s discretion to use these funds. A domino effect (on a micro-scale) that can occur individually for borrows is the emergence of the household health scale imbalance – where the percentage of liabilities may become more extensive and cause the asset side to be smaller or even minus.
From the discussion above, we can see that technological advances – especially fintech lending, which is currently increasing in Indonesia – can indeed answer some groups’ needs such as developing MSMEs. However, times have made lifestyle changes that also affect fintech lending business actors themselves by looking for loopholes that make people interested in applying for online loans. We should be smart to utilize technological advancement products, including how to control ourselves in using this technology. The long-term effect is so that new problems will not arise, which can become personal burdens.
Author: Dhalia Ndaru Herlusiatri Rahayu
Editor: Amelinda Pandu Kusumaningtyas
[i] https://www.ojk.go.id/id/berita-dan-kegiatan/publikasi/Pages/Penyelenggara-Fintech-Terdaftar-dan-Berizin-di-OJK-per-30-April-2020.aspx (Diakses pada 5 Agustus 2020)
[ii] https://ojk.go.id/id/berita-dan-kegiatan/publikasi/Pages/Penyelenggara-Fintech-Terdaftar-dan-Berizin-di-OJK-per-20-Desember-2019.aspx (Diakses pada 5 Agustus 2020)
[iii] Ramadhani, N. 2020. Sejarah dan Perkembangan Fintech di Indonesia. Akseleran [online] https://www.akseleran.co.id/blog/perkembangan-fintech-di-indonesia/ (Diakses pada 15 Agustus 2020)
[iv] Tim Pikiran Rakyat. 2019. Alasan Mengapa Fintech Tumbuh Subur di Indonesia. Pikiran Rakyat [online] https://www.pikiran-rakyat.com/ekonomi/pr-01320302/alasan-mengapa-fintech-tumbuh-subur-di-indonesia (Diakses pada 15 Agustus 2020)
[v] Dihimpun dari berbagai narasi marketing usaha fintech lending.
[vi] https://apjii.or.id/downfile/file/BULETINAPJIIEDISI40Mei2019.pdf (Diakses pada 5 Agustus 2020)
[vii] https://www.psychologicalscience.org/news/releases/social-acceptance-and-rejection-the-sweet-and-the-bitter.html (Diakses pada 15 Agustus 2020)
