The Rise Of Paylater, Banks Are Asked To Have Administrative Risk Mitigation

Paylater (Unsplash)

The Financial Services Authority (OJK) has asked banks to have an adequate risk mitigation mechanism in the implementation of the Buy Now Pay Later (BNPL) in order to anticipate the risk of default.

"To anticipate the risk of default, OJK asks banks to have adequate risk mitigation and apply the precautionary principle since the beginning of the partnership," said OJK Banking Supervision Chief Executive Dian Ediana Rae quoting Antara.

The necessary steps include comprehensive partner selection, as well as regular monitoring and evaluation of performance.

In this case, if there is a default, Dian said the bank must have an adequate risk mitigation strategy, including by forming a backup of losses to credit problems and establishing settlement steps.

According to Dian, in accordance with the Banking Law, banks have a function as an intermediation agency so that the BNPL facilities held can become channeling cooperation or lending activities through fintech companies.

"Credit channeling cooperation through fintech is one of the strategies to encourage the implementation of banking intermediation functions to run more optimally, including through increasing credit to MSMEs, by utilizing the ease of information technology aspects," he said.

Therefore, banks need to ensure that credit channeling cooperation can pay attention to business licenses, feasibility of fintech as channeling recipients, compliance with consumer protection regulations, and adequate risk assessments.

"Credits channeled through channeling can be productive or consumptive, depending on the objectives of using credit by end-users and each bank's policies and risk-appetite," concluded Dian.