Despite efforts to curb the spread of online gambling, the industry remains resilient, fuelled by easily accessible apps on unregulated platforms. — The Jakarta Post
THE rise of digital finance in Indonesia has been nothing short of revolutionary.
From bustling cities like Jakarta to remote villages, mobile phones and online financial tools have connected people to banking services that were once out of reach.
In a rapidly digitising society, these innovations have facilitated a cashless economy, significantly boosting economic transactions, particularly during the Covid-19 pandemic, when physical interaction was limited.
Yet as the saying goes, every rose has its thorn.
While the bright side of digital finance has driven financial inclusion and economic growth, its dark side has given rise to financial vices, most notably online gambling and the proliferation of predatory online loans, locally known as pinjol.
I recall a moment at Palmerah Station in Central Jakarta, waiting for my on-demand motorcycle taxi to arrive.
Nearby, I noticed a driver absorbed with his phone, not in his ride-hailing app but in a slot machine game on an online gambling platform.
For many Indonesians, this scene has become disturbingly familiar. It highlights a troubling trend: What was once a hidden activity has now become a visible and accessible part of everyday life.
Amid these challenges, it’s important to acknowledge the efforts of law enforcement, including the recent arrest of several officials at the Communications and Digital Ministry on suspicion of protecting online gambling networks.
The crackdown offers a glimmer of hope, although it is tempered by the grim reality that those tasked with guarding against online gambling have instead enriched themselves from its profits.
The arrests highlight a deep-rooted problem within the country’s regulatory bodies, underscoring an urgent need for accountability to protect public trust and ensure that officials serve the public interest, rather than exploit the people.
Most of us have witnessed this digital transformation firsthand.
We’ve seen how digital tools have empowered businesses, expanded financial inclusion and made managing finances easier.
Digital finance has brought remarkable benefits, connecting people to services once out of reach and enhancing the efficiency of everyday transactions.
With the ability to send money, apply for loans, and make instant payments, the possibilities seem endless.
Alongside these advancements however, we cannot ignore the growing risks.
Bank Indonesia reported 58,478 trillion rupiah or about US$3.7 trillion in digital banking transactions in 2023, up 13.48% from the previous year.
Similarly, payments using the Quick Response Code Indonesian Standard system surged 130.01% to reach 229.96 trillion rupiah.
This growth is a testament to the evolution of Indonesia’s digital economy, offering unparalleled convenience for consumers and businesses alike. Despite these advances, the rise of digital finance has brought with it unintended consequences.
During a recent visit to my hometown, I overheard a conversation at a local coffee shop that struck me deeply. It wasn’t about politics or sports, but about online gambling.
They talked about who had won, who had lost and who had spiralled into debt.
This issue has grown far beyond casual losses to become a serious societal problem. In 2023, online gambling reached alarming levels in Indonesia.
According to the Financial Transaction Reports and Analysis Centre, 327 trillion rupiah was circulating in 168 million transactions via online gambling that involved 3.29 million Indonesians.
Despite efforts to curb the spread of online gambling, the industry remains resilient, fuelled by easily accessible apps on unregulated platforms.
The government has launched high-profile crackdowns and made arrests, including of celebrities who have promoted these platforms.
Yet the online gambling industry continues to exploit people’s desire for quick wealth, feeding an addiction that has taken root in many communities. The growing gambling problem in Indonesia is inextricably linked to a parallel rise in online loans.
Many individuals, unable to sustain their gambling habits, are turning to predatory digital lenders for quick cash.
In some cases, money intended for essential needs is instead drained for betting. These loans, often from illegal or unregistered lending platforms, come with exorbitant interest rates that trap borrowers in deep debt.
According to the Financial Services Authority, online loans ballooned 353.3% in just five years, from 13.2 trillion rupiah in 2019 to 59.6 trillion rupiah in 2023.
Loans have increased at an annual average of 88.3% and concerning trends have emerged in non-performing loans, particularly in buy now, pay later schemes.
This reflects the larger trend of young people living beyond their means, enabled by easy access to credit and compounded by the addictive nature of digital finance.
The government has acknowledged these issues, but its efforts to address them seem inadequate.
Although it has implemented regulations targeting online gambling platforms as well as the influencers promoting them, their enforcement has been limited, complicated by the decentralised, anonymous nature of online platforms.
While efforts to regulate online loans have seen some improvement, public awareness campaigns still fail to reach the most vulnerable groups, especially young people and low-income communities, which are most at risk of falling victim to these financial traps.
The question remains: Are these efforts enough? With the rapid adoption of digital finance, the government always seems to be one step behind.
Indonesia stands at a critical juncture in its economic development. Digital finance holds enormous potential for growth, but without proper oversight, the risks could outweigh the rewards.
The middle class, once seen as the backbone of the nation’s economy, is increasingly vulnerable to the lure of online gambling and the dangers of high-interest loans.
The situation is even more dire for the lower-income population, with many finding themselves trapped in a vicious cycle of debt and addiction, unable to break free from the financial stranglehold of gambling losses and predatory lending.
The stakes are high. Indonesia must confront these challenges head-on to secure the future stability of its economy.
Simply reacting to crises is no longer enough.
The government must adopt proactive policies that protect the benefits of digital finance while mitigating its risks. — The Jakarta Post/ANN
Yoss Fitrayadi is a partner at digital and media agency Wavemaker Indonesia. The views expressed here are the writer’s own.
