Legal Reconstruction of Indonesian Banking Laws: Challenges and Opportunities for Digital Bank Regulation

In digital banking, customers who are served digitally can be done starting from the business connection between the bank and the customer starting from opening an account, executing account transactions, to closing a deposit account which is carried out through the use of Information Technology. This of course makes it easier for customers because these activities can be done anywhere. Behind the convenience obtained from using digital banking services, there are also risks involved. Thus, the need for legal protection for customers who use digital banks is necessary to protect consumers from customers in banking services, because the law integrates and serves society. However, unfortunately the regulations regarding Digital Banks in Indonesia have not yet stood alone and are still being reviewed by the OJK. Therefore, so that the special regulations for digital banks in Indonesia can be of good use and not harm any party, references are needed from other countries that have issued legal regulations regarding digital banking to see the legal regulations for digital banks that have been previously implemented in that country so that they can become a reference for the process of making special regulations regarding banking in Indonesia. One country that has implemented special regulations regarding digital banking is Singapore. Based on these problems, in this journal the author will discuss the General and Systematic Overview of Legal Protection for Digital Bank Customers in Indonesia and the Comparison of Digital Bank Regulations in Indonesia and Digital Banks in Singapore for Customers.

Technology and digitalization are growing and affecting various economic and industrial fields, one of which is banking industry. The presence of technology and the phenomenon of digitalization has directed this industry to a digital transformation process through digital banking. Digital banking was developed to serve customers faster, easier, and in accordance with customer experience, itcan be done completely independently by customers while still paying attention to security aspects through optimizing digital technology systems. The presence of lifestyle integration, automation in banking services is an important aspect that needs attention. Security and customer trust are important for banks, socustomers trust banks as a one-stop service for their financial needs. However, the problem faced in the digital banking era is how fardigital banking can be done by improving the quality of service to customers while paying attention and without compromising transaction security. In addition, there are cyber security issues related to consumer data protection, which until now do not have special regulations to provide legal certainty. The urgency of consumer protection for digital banking services will be assessed using legal research methods with a doctrinal approach contained in primary and secondary legal materials. The purpose of this study is to examine and analyze the developments and legal challenges of digital banking consumer protection in Indonesia. Basically digital banking in Indonesia has regulations but only limited to two things, namely digital banking services and regulations regarding the legal status of the existence of digital banks in Indonesia. For digital banking services, it is regulated in POJK No.12/ POJK.03/2018. Meanwhile, the legal status of the existence of digital banks in Indonesia is regulated in POJK No.12/POJK.03/2021. The challenge of implementing digital banking includes 6 (six) aspects, one of which is customer protection of personal data and the risk of data leakage that does not yet have specific regulations governing it. The principle of effective customer protection in banking law is for common goals and can be implemented, so that each banks can serve and protect customers better without harming other parties.

In the modern realities of digital transformation, the banking sector faces significant challenges that lead to changes in the methods of traditional banking operations and changes in the way banks interact with clients based on the use of digital technologies. One of the key trends in this area is the development of digital banking as a promising way of banking services. The study aims to study the theoretical and practical aspects of the development of digital banking in Ukraine's financial services market under conditions of digital transformation. The results of the analysis indicated an increase in the amount of attention paid by domestic and foreign scientists to the digital banking development issue. The article examines the theoretical foundations of the implementation of digital technologies in the banking sphere. The concept of digital banking is described. The SWOT analysis determined the main advantages, opportunities, disadvantages, and possible threats associated with using digital banking. The study distinguishes between the concepts of a purely digital bank and a traditional bank that uses digital technologies in its activities. The peculiarities of the activity of digital banks of Ukraine are characterized. The number of digital banking users in the world as a whole and separately in Ukraine was analyzed. The level of development of domestic digital banking was assessed, and the number of cashless transactions using payment cards from 2019 to 2023 was analyzed. The forecast of the number of bank branches and the volume of non-cash payments using payment cards made it possible to determine that in the future the number of bank branches will decrease, and the volume of non-cash transactions will increase. The digital banks of Ukraine are characterized, and the main innovative products of the leading traditional banks are highlighted. Based on the research of the company InMind, it was concluded that the share of digital banking users is growing and the most popular transactions in digital banking among Ukrainians were singled out. An analysis of the ease of use of mobile applications of domestic digital banks was also conducted, among which the most convenient and functional applications were found to be Monobank, Sense Bank, A-Bank, and the least - Raiffeisen Bank and Oschadbank.

This research highlights the influence of Fintech and digital banking on the share prices and trading volumes of digital banks in Indonesia. It is an empirical study aimed at exploring the relationship between technological advancements in the financial sector and the performance of digital bank stocks. Through a comprehensive assessment of market data, the study investigates how innovations in Fintech and digital banking services impact investor behavior and market dynamics. The study employs a quantitative approach, analyzing data from various digital banks listed on the Indonesian stock exchange. The participants in this research include publicly traded digital banks with significant market capitalization and trading volumes. The data set spans over a period of five years, providing a robust basis for examining trends and patterns. This research reveals a notable gap in the literature regarding the direct effects of Fintech innovations on digital bank performance metrics, such as share prices and trading volumes. Moreover, the study identifies several deficiencies in the current market analysis frameworks, such as the lack of real-time data integration and the underestimation of Fintech's disruptive potential. To address these gaps, the research suggests the adoption of advanced analytics and real-time monitoring tools. The findings also indicate a significant increase in trading volumes and stock price volatility correlated with the introduction of new Fintech products and services. This underscores the critical role of technological innovation in shaping the future landscape of digital banking in Indonesia.

The emergence of digital banks in Indonesia triggered intense competition among digital banks. This competition encouraged digital banks to create marketing strategies that are tailored to customer behavior and preferences. The invite-a-friend strategy, known as referral marketing, involves the participation of customer connections to recommend products and services to new customers through word of mouth. The potential target customers of digital banks are Generation Z. Therefore, digital banks need to develop innovative business strategies to encourage Generation Z usage decisions by utilizing the referral concept in their promotions. This study examined the effect of the invite-a-friend strategy that occurs due to the dimensions of eWOM - the dimensions of concern for others, economic incentives, helping the company, and expressing positive emotions implemented in the referral program contained in XYZ digital banking on usage decisions. The sample included 148 respondents XYZ digital bank customers who use the referral program. The data analysis technique used in this study was PLS-SEM using SmartPLS version 3 as an analysis tool. The results of this study showed that three dimensions have a positive and significant influence on the usage decisions of Generation Z customers, concern for others, economic incentives, helping the company and expressing positive emotions. Helping the company is the most dominant factor influencing Generation Z customer decisions. Keywords: digital bank, e-referral, strategy to invite friends, usage decision

Rapid technological development encourages disruptive innovation that transforms the concept of the value chain into a digital ecosystem. Companies can leverage the resources of other companies as part of their value chain, without having to own them. It can generate greater risk due to external factors that cannot be controlled directly. Digital Bank Z is a digital bank with a large business ecosystem transforming from Book Bank I. They need to address these potential risks through good risk management while digital banking expansion in Indonesia is increasing rapidly. This case study aims to obtain an evaluation of how the digital transformation and risk management held by Digital Bank Z as well as to produce the conceptual framework for digital ecosystem risks. This qualitative research conducted semi-structured interviews as triangulation with informants from Digital Bank Z and Financial Services Authority or Otoritas Jasa Keuangan (OJK). Digital transformation produces competitive advantages for Digital Bank Z through higher interest rates, but the regulator cited, “digital bank is not a disruptor or competitor”. Recently, risk management is more focusing on operational risk due to no specific regulation of digital banks yet. As recommendations, the conceptual framework provides three stages to identify the risk of collaboration and the digital ecosystem.

Purpose: Thanks to the Fourth Industrial Revolution and the digital economy, digital banking has become an attractive business trend. Moreover, the spreading of the Covid-19 virus worldwide over the past two years has boosted the digitalisation of banking services. The development of digital banking is now becoming an uncontroversial issue that will attract the concern of scholars, bank managers, and policy-makers.Methodology: As an emerging country with a young population having significant digital appliance joy, Vietnam will be a perfect case study to research the development of digital banking. Besides, digital banks, as well as the appliances of artificial intelligence (AI) in the banking sector, have appeared in Vietnam’s banking system at several different levels.Findings: Moreover, most commercial banks in Vietnam are now in the race to complete their digital services to provide innovative digital banking services that add more value to their clients. Hence, the chapter will describe the overall picture of Vietnam’s current digital banking market.Implications: Based on the crucial features of the operations of several digital banks and the appliances of AI in the digital banking sector in Vietnam during the chosen period, the author would like to give information on the potential of the Vietnamese digital banking market and suggest the key policies which the Vietnamese government should consider to support the digital transformation of the banking sector in Vietnam.

Research Originality: This research novelty lies in applying the Stimulus-Organism-Response (S-O-R) theory to measure e-loyalty among digital banking customers in Indonesia. This approach has not been widely explored in Indonesia's digital banks' context.Research Objectives: This research evaluates e-loyalty among digital banks' customers in Indonesia using the SOR theory's direct and indirect measurement methodologies.Research Methods: The sample consists of 130 participants drawn from customers of both Islamic and conventional digital banks in Indonesia. This research applies PLS-SEM through SmartPLS software for structural model analysis.Empirical Result: The results show that e-CRM, e-trust, and e-satisfaction directly enhance e-loyalty. E-CRM and e-trust also influence e-loyalty indirectly through e-satisfaction. Moreover, e-satisfaction mediates these relationships, highlighting its crucial role in strengthening customer loyalty in Islamic and conventional digital banks.Implications: Digital banks need to enhance e-CRM by improving application features and usability to maintain customer interaction. Additionally, e-trust is crucial to continuously strengthening security systems to reduce customer concerns. Moreover, services must consistently meet or even exceed customer expectations to achieve high satisfaction and foster customer loyalty.JEL Classification: G21, M31, D91

Digital banks have emerged as a new phenomenon in Indonesia’s financial services ecosystem. Because it uses technology and provides efficient services, the emergence of the digital bank is expected to be a game changer. In 2021, PT Bank Sukses Bersama, Tbk launched the life-centered Sukses Application, which simplifies, collaborates, and innovates financial management. Bank Sukses Bersama’s transformation from a conventional bank to a digital bank aims to increase its business growth and efficiency. However, since its launch, Bank Sukses Bersama has not attained a cost-to-revenue ratio which would be optimal in comparison to its competitors. The research objectives for this study are to evaluate Bank Sukses Bersama’s market segmentation and find opportunities to increase users by reaching more potential markets through new segmenting, targeting, and positioning, as well as to propose a marketing communication strategy for Bank Sukses Bersama in order to increase customer acquisition to maximize the income and improves Bank Sukses Bersama’s performance. This research utilized both primary and secondary sources of data The primary data was collected through questionnaires targeted for 150 respondents of bank customers in Indonesia. The purpose of the questionnaire is to obtain responses from bank customers in Indonesia regarding digital banks in Indonesia, including their perceptions of Bank Sukses Bersama. This research assessed internal and external analysis of Bank Sukses Bersama in digital banking industry. The suggested Bank Sukses Bersama marketing communication strategy proposes an approach for emphasizing the brand’s value proposition, engaging customers through storytelling and personalization, and utilizing digital platforms and collaborations to increase customer acquisition and retention. This strategy intends to position Bank Sukses Bersama as an innovative and trustworthy digital banking solution in Indonesia through integration with the target population and the bank’s fundamental values. The scope of this study is mainly focus on Bank Sukses Bersama as a digital bank. The company’s identity has been concealed for publicity and reasons related to confidentiality.

Digital transformation has significantly impacted Indonesia's banking industry, leading to the rise of digital banks that leverage technology for their operations, posing challenges to traditional banking models. This research investigates the implementation of enterprise architecture within the core features of digital banking in Indonesia, utilizing the TOGAF framework and Archimate modeling. The study's primary objective is to identify the core processes, challenges, and opportunities associated with managing the complex architecture of digital banks. Employing a qualitative methodology, data were gathered through in-depth interviews, direct observations, and a review of pertinent literature. The research identified three central processes in digital banking operations: deposits, time deposits, and loans. These processes were then modeled using the TOGAF framework and Archimate to align business strategies with operational activities more effectively. The SWOT analysis conducted highlights digital banks' strengths in operational efficiency, strategic partnerships, and innovation capabilities, while also recognizing weaknesses such as technological dependency and challenges in serving the less tech-savvy population. The study also identifies opportunities for product innovation, market expansion, and ecosystem integration. However, threats like regulatory changes, increased competition, and cybersecurity risks must be carefully managed. The research recommends adopting emerging technologies, enhancing third-party risk management, and improving customer data security and privacy to bolster digital banks' global competitiveness, operational sustainability, and service innovation.

The emergence of digital banks in Indonesia, such as Blu by BCA, Bank Jago, Allo Bank, and Bank Neo Commerce has been driven by the positive response from the public and the increasing demand for digital banking services, especially in the Covid-19 pandemic. With the growth of digital banking in Indonesia, it is important to understand the factors that shape customer satisfaction and loyalty. This study aims to examine the influence of customer experience on satisfaction and loyalty in the digital banking industry, with focus in Indonesia (Makassar). Seven hypotheses are proposed to examine these relationships. The study utilizes a sample of digital banking customers through convenience sampling and collects data using electronic questionnaires. Structural equation modelling (PLS) is employed for data analysis, considering validity and reliability measures. The findings reveal that convenience and security significantly influence customer satisfaction, while the influence of usefulness is not supported. Additionally, customer satisfaction is identified as a significant mediator in the relationship between customer experience and loyalty. This study emphasizes the importance of improving convenience and security aspects in digital banking services to enhance customer satisfaction and loyalty. In conclusion, this research provides valuable insights for digital banks in Makassar, Indonesia, to enhance their services and cultivate strong customer relationships. Prioritizing convenience and security, along with understanding the influence of customer satisfaction on loyalty, can drive the success of digital banking firm.

The enthusiasm of the Indonesian people towards Islamic digital banks is very high Therefore, it is important to know how to regulate and protect sharia digital bank customers in Indonesia. This research is a type of library research with qualitative methods to examine all data related to digital bank regulations in Indonesia. The results of this study indicate that the regulation of Islamic digital banks in Indonesia is regulated in POJK No. 12 of 2018 concerning the Implementation of Digital Banking Services and in POJK No. 12 of 2021 concerning Commercial Banks, specifically in Chapter IV in articles 23-31. Regarding customer protection, it refers to POJK No. 1 of 2013 concerning Consumer Protection in the Financial Services Sector, POJK No. 12 of 2018 concerning the Implementation of Digital Banking Services by Commercial Banks to be precise in Chapter V on Customer Protection, and OJK Circular Letter No. 17 of 2018 concerning Guidelines for the Implementation of Consumer Complaint Services in the Financial Services Sector.

In Indonesia, digital banking is advancing at a fast pace. As the law regulating it is incompatible with the current digital banking, it is necessary to establish new law capable of adapting to the development of digital banking because of the high number of digital account break-ins experienced by customers due to a lack of adequate regulations such as the law governing digital banking. Since digital banks are regulated in the Financial Services Authority (FSA) regulations, they have been unable to address risk issues due to insufficient binding force. This study employed a normative approach by collecting data: library research and discussions. The study’s findings indicate the governance of digital banks has flaws: vulnerability to identity theft, online crime, malware assaults, and the inability in accessing by all parties. Regulations governing personal data protection are largely outlined in Article 26 of Law No. 19 of 2016. This rule does not go into depth about personal data security in digital banking governance, thus it can lead to multiple interpretations. Subsequently, Law No. 10 of 1998 on financial is a banking regulation based on conventional not digital. Therefore, these two regulations are incompatible with digital banking governance in protecting personal data and giving legal clarity. Regulations No. 12/FSAR.03/2021, No. 13/FSAR.03/2021, and No. 14/FSAR.03/2021 regulate digital banking. These provisions have flaws: the ease of obtaining licenses, emphasizing administrative punishments, lack of binding force, and the absence of regulations governing personal data protection in digital banking governance in Indonesia. Therefore, it is urgent to regulate personal data in one specific law.

In modern conditions, the traditional banking system in customer service is being destroyed, replaced by new technologies, consumption models, and digital banking. The emergence and development of financial technologies has contributed to the formation of a new generation of banks. These relationships affect the entire range of financial services provided to users by digital banking, along with corresponding changes in both internal corporate relationships and external relationships between bank staff and its customers. The level of competitiveness in the banking sector and the profitability indicators of its activities depend on what types of services a bank provides and the degree of its involvement in the digital economy. The article examines the prospects for the further development of digital banking in the banking sector of Ukraine and innovations in the field of banking services. A comparative characteristic of traditional and digital banks was conducted, and digital innovations used in leading banks to increase the attractiveness of banking services in order to attract and retain customers were analyzed. It is emphasized that most banks strive to build their work on the basis of the "digital bank" model, which represents online interaction with the client 24 hours a day, 7 days a week for the convenience of customers. The types of financial technologies used in banking, such as blockchain, artificial intelligence, mobile applications, biometric identification, are studied. The advantages of using artificial intelligence and cloud technologies in digital banking are highlighted. Special attention is paid to new scenarios in mobile applications of advanced innovative foreign banks, such as Monzo Bank (England), Bank No. 26 (Germany), EVO Bank (Spain). It is noted that Ukrainian mobile banking applications have high ratings among the countries of Eastern Europe and Asia. It is noted that during the transition from the traditional model to the digital banking model, new types of risks arise, such as cyber risk, risks of automation and robotization of processes, risk of IT systems and IT equipment, and ways to mitigate them are identified. The conclusions formulate the main directions for the further development of digital banking in Ukraine.

The banking industry since pandemic has shifted servicing dramatically from its traditional branches to become far more digitally flexible. Banks rushed to face-lift the front-end look and feel and enable non-essential digital services without asking users their needs. Thus, this bank attitude as greater impact on building a good digital banking customer experience that leads the users to fully adopt digital. To have a clear vision of how banks can stand out to a successful digital transformation we interview 634 digital bank users from the generation XYZ. To find out about the digital banking perceptions of Generation Z (born 1997-2012) , Generation Y (born 1981-1996), and Generation X (born 1965-1980) we perform a qualitative analysis using Leximancer content analysis software to determine differences and characteristics of users' attitudes toward digital banking. The findings highlighted nineteen concepts (transfers, bank, channels, products, digital, availability, anywhere, services, operations, use, account, savings, speed, costs, information, options, price, complex, and market) grouped in eight key themes perceived by users using digital banking channels, namely: transfers, availability, use, speed, information, price, complex and market. The three tags categories generation XYZ result of the presence of highly connected with concepts or independent variables showing prominence between X-generation and availability and services concept, Y-generation, and market, anywhere, bank and operation concepts, Z-generation, and transfers concepts. These results showed that digital bank users are concerned about price, speed of transfers and product information, the anywhere availability of services and operations in the financial market, with some constraints about the complexity of options used to manage their accounts and savings. More the Y-generation (middle age) take more advantage of digital banking to explore bank/financial market and perform operations anywhere, the X-generation (older age) look digital banking mainly for the availability of services and Z-generation (younger age) simple for transfers. This study contributes to understanding the use and preference of digital banking, allowing us to propose a new conceptual model to explain the digital banking usage, helps to identify what is important for each XYZ generation to increase their adoption of digital banking and alerts to the use complex of multiple options that probably are not the main focus to successfully used by this generations. Highlighting the users' perceptions is important for the bank industry to develop digital banking features that align with users' expectations and to increase the success of digital transformation by shifting servicing dramatically from a brick-and-mortar stalwart to become far more business digitally flexible.