Banking Transformation in the Digital Era: Bank Cooperation with Financial Technology and the Role of the Financial Services Authority in Digital Bank Supervision

Abstract

The Industrial Revolution 4.0 has brought significant transformations to various aspects of life, including financial activities, which have increasingly transitioned into digital systems facilitated by financial technology (fintech). Fintech accommodates remote financial activities, reshaping the banking industry through the emergence of digital banks that enhance customer convenience in accessing banking services. This development reflects the growing cooperation between banking institutions and fintech companies. However, digital-based financial activities are inherently susceptible to system vulnerabilities, potentially causing customer losses. This study explores two main issues: (1) the nature of cooperation between banks and fintech and (2) the role of the Financial Services Authority (OJK) in supervising digital banking operations. The findings reveal that collaboration between banking and fintech is achieved by integrating banking services with fintech platforms, enabling seamless customer access. The OJK employs direct (on-site) and indirect (off-site) supervision methods to ensure regulatory compliance and mitigate risks. Additionally, the OJK leverages advanced technologies such as the OSIDA (OJK Suptech Integrated Data Analytics) system to optimize supervision and implement a regulatory sandbox framework to foster innovation while maintaining oversight.