Technology is a tool of protection, not an instrument of agitation or a vehicle for crime. This principle must be ingrained in the minds of every user and provider of digital services. Sadly, reality often tells a different story: technology that should empower people is frequently misused for harmful practices, and one of the most damaging manifestations is the proliferation of illegal online lenders that entrap consumers. Data from the Financial Services Authority (OJK) paint a sobering picture: by mid-2025, thousands of illegal online lending entities had been blocked and more than a thousand new cases were identified that year alone, numbers that underline the urgent need for collective action.
Regulation is already in place to confront this wave. OJK Regulation No. 77/POJK.01/2016 on Information Technology Based Lending and Borrowing requires platform registration and tight supervision of fintech lenders, while OJK Regulation No. 22 of 2023 on Consumer Protection in the Financial Services Sector strengthens the obligations of financial service providers to protect users, including pretransaction disclosure and compensation mechanisms for victims. Regulation provides the legal framework, but without reliable enforcement tools, protection remains theoretical.
This is where technology should play a dual role: not merely as the object of oversight but as the instrument of enforcement. Responsible fintech firms now combine artificial intelligence with a suite of other technologies to prevent fraud, preserve data integrity, and strengthen know-your-customer processes. Beyond AI, effective protective technologies include blockchain to create a transparent transaction trail; big data analytics to detect anomalous patterns; biometric e-KYC for identity verification; end to end encryption to safeguard confidentiality; and hardened cloud infrastructure for scalability and resilience. Together, these tools can turn technology from a potential threat into an operational shield.
AI deserves particular attention for its ability to identify fraud patterns quickly and at scale. Deloitte’s reports on AI adoption in business, including those covering the Asia Pacific region, show that many financial firms are accelerating investments in AI to boost efficiency and security. Deloitte notes that generative AI and machine learning have become priority investment areas because of their advantages in automation and anomaly detection. Yet AI is not a silver bullet: data quality, algorithm governance, and human oversight are decisive factors in determining real effectiveness.
Indonesia is following the same trajectory. On the ground, we see machine learning applied to alternative credit scoring on several lending platforms, chatbots and virtual assistants deployed for customer service, and real time anti-fraud systems in many digital banks and e-wallet providers. The Indonesian fintech market is large and dynamic; a range of industry reports position Indonesia as a leading player in ASEAN, with substantial fundraising activity and a significant user base. This market potential makes the adoption of protective technologies not optional but imperative to maintain scale and security.
How ready is the industry? Local reports and surveys point to progress, but also to clear gaps. Regulators and industry associations note that hundreds of fintech firms operate legally; in the third quarter of 2024, roughly 302 fintech companies were registered under supervisory bodies and relevant associations. This rapid growth demonstrates ecosystem vitality, yet the integration of advanced technologies remains uneven. AFTECH and other industry studies indicate that most incumbents have incorporated elements such as AI, blockchain, or big data into their business models, but adoption is concentrated among large urban players. Key constraints are unequal broadband infrastructure, a shortage of skilled digital talent in outlying regions, rising cybersecurity risks, and evolving compliance requirements.
Addressing these barriers requires multidimensional solutions. Technically, the adoption of layered security architectures, multi factor authentication, encryption of data at rest and in transit, machine learning based anomaly monitoring, and interoperability standards is essential. Institutionally, collaboration among regulators, industry players, and academia accelerates the creation of a secure data ecosystem and best practices. Karen Gordon Mills of Harvard has emphasized the importance of regulator-industry-academic collaboration and major investments in training programs to close the skills gap, a prescription that fits Indonesia’s context. Such an approach ensures that technology is used not merely for automation but for empowering service operators.
Regulation must be backed by concrete technical implementation. POJK 77/2016 and POJK 22/2023 lay out registration duties, disclosure obligations, and provider responsibilities. Enforcing these rules should be paired with a dynamic blacklist, automated reporting protocols, and integrated consumer reporting systems so that action against illegal entities is swift and coordinated. OJK’s blocking efforts and the work of Task Force PASTI (Digital Crime Enforcement) have demonstrated effectiveness when interagency synergy is achieved. To shift from reactive to proactive prevention, regulations should also incentivize licensed providers to deploy protective technologies through technical requirements and targeted incentives.
Consumer awareness is another critical pillar. Protection is not only about blocking illegal operators but also about educating the public to recognize fraud signals, understand their rights under OJK regulations, and know how to file complaints. A nationwide education campaign involving OJK, AFTECH, banks, telecom operators, and the media should be sustained: the best protection often begins with an informed consumer.
From a macroeconomic perspective, investing in digital infrastructure and fintech security yields a double dividend: it reduces fraud losses while building public trust that supports broader financial inclusion. Regional reports such as PwC’s FinTech in ASEAN 2024 and market analyses identify ASEAN with Indonesia among its largest markets, as a major growth area for fintech. The economic potential of this market will be realized only if consumer protection and security are maintained.
Technology must be positioned as a shield, not a weapon. Combining clear and robust regulation, deployment of protective technologies rooted in AI and encryption, strengthening human capacity, and broad public education offers a practical recipe to minimize the harm of illegal online lending and to nurture a healthier fintech ecosystem. As Adam Smith’s thinking reminds us, efficient markets work better when governed by rules that protect the public interest. Indonesia’s fintech future requires a balance between innovation and protection: when all elements are aligned and synchronized, safe financial inclusion will cease to be a slogan and become a lived reality that benefits the whole society.