On Oct 23, 2023, the Financial Services Authority of Indonesia (OJK) sent shockwaves through the fintech sector by freezing Akulaku's PayLater services. 

While opinions vary on the potential fallout for Indonesian consumers, there's a consensus that regulatory intervention is crucial, especially for the stability and security of the nation's financial landscape.

This article unravels the rationale behind OJK's penalty, sheds light on Akulaku's plans, and explores the evolving trends in pay-later services among Indonesian consumers. 

What Happened to Akulaku Pay Later?

Akulaku, a prominent player in Indonesia's fintech ecosystem, offers a range of financial services, including Pay Later, which allows users to make purchases on credit and pay back the amount at a later date. 

(Need deeper insight into the Buy Now Pay Later business model? Read our case study here.)

The freezing of Akulaku's Paylater services by OJK stems from concerns with regulatory requirements compliance and potential risks associated with their offering.

OJK's primary role is to safeguard the stability and integrity of Indonesia's financial system. In this case, they have taken steps to ensure that consumers have protection from potential financial and security risks. 

Apart from Akulaku, OJK has also sent guidance letters to all financial companies that offer BNPL services. The main thing OJK requested from these companies is to improve and strengthen their underwriting process.

Why is the Underwriting Process Important for Paylater Services?

In the case of loans, the underwriting process evaluates the applicant's creditworthiness by considering factors like credit history, income, employment stability, debt-to-income ratio, and other financial indicators. 

This helps financial institutions decide whether to approve the loan and if so, at what terms.

The underwriting process is critical in maintaining the financial stability of not only the borrowers but also the lending institutions. It ensures that they are adequately compensated for the risk they are taking on.

(For more information on why thorough evaluation is necessary, read our article about SLIK OJK here.)

What Will Happen to Akulaku in the Future?

According to Agusman, the Chief Executive Supervisor of Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Other Financial Services Institutions at OJK, the suspension on Akulaku's Paylater services will be lifted once the Akulaku has successfully executed all corrective action plan obligations within the stipulated time frame.

Akulaku's representatives have also publicly stated their commitment to address the specific concerns raised by the OJK. 

The enhancement of the underwriting process will encompass areas like risk management, corporate governance, and information technology risk management, aligning with the OJK's directives and the required regulations.

Current Trends of Paylater Uses in Indonesia

Pay Later services have gained immense popularity in Indonesia in recent years, offering consumers a convenient and flexible way to access credit for their purchases.

Many Indonesians, especially those who may not have access to traditional banking services or credit cards, have embraced pay-later services to manage their finances and meet their immediate needs. 

A survey by Populix, conducted in September and based on responses from 1,017 respondents, revealed that pay later users in Indonesia are predominantly from the millennial generation (63%) and based in Java (55%).

Currently, the majority of Paylater users own monthly installments of less than IDR 1 million. The highest recorded transaction is also still below IDR 1 million for 75% of users.

In terms of usage, consumers primarily use pay later services to purchase data/internet/electricity (48%), clothing (48%), and covering monthly personal expenses (35%).

Meanwhile, a smaller percentage utilizes it for electronic purchases (21%), buying the latest gadgets (19%), and funding holidays (10%).

Biggest Paylater Services in Indonesia

According to OJK data, the number of pay-later users itself has surged by 18.18 million contracts, representing a year-on-year (YoY) growth of 33.25%. As of May 2023, the total number has reached 72.88 million contracts.

The surge in popularity has led to a proliferation of pay-later providers in the market, with various players vying for a share of this rapidly expanding industry.

The survey identified notable paylater service providers in Indonesia, with Shopee Paylater leading at 89%, followed by GoPay Later (50%), Kredivo (38%), Akulaku (36%), Traveloka Paylater (27%), Home Credit (16%), Indodana (13%), and Atome (5%).

However, in terms of usage frequency, the survey revealed that the most frequently used by consumers were Shopee Pay Later (77%), GoPay Later (28%), and Akulaku (18%). 

It's not surprising, as both Shopee Paylater and GoPay Later have direct integration with the two biggest online marketplaces in Indonesia.

Other than marketplace integrations, the Populix survey also highlighted several factors influencing Indonesian consumers' choice of pay-later service, including registration with OJK, flexible installment payment options, an easy registration process, and low-interest rates.

The Future of Paylater Services in Indonesia

As the popularity of pay-later services continues to grow in Indonesia, both regulators and market players must work together to establish a robust framework that ensures consumer protection without stifling innovation.

OJK's decision to freeze Akulaku's Paylater services especially highlights the critical need for a balanced approach to regulating the fintech industry. 

Have concerns about the crucial shifts in Indonesia's financial landscape? Connect with Askpert.id expert network and get tailored insights for effective risk mitigation.