According to Wijaya, ICS will provide opportunities to customers who do not have creditworthiness to access financial services.
In Indonesia, low-income households and micro, small, and medium enterprises (MSMEs) face challenges in accessing credit from banking and other financial institutions, she explained.
This is because of limitations concerning data related to credit history, collateral, and official proof of income, she added.
A Financial Services Authority (OJK) survey in 2022 showed that the financial inclusion index at the national level reached 84.2 percent, or increased from 76.19 percent in 2013.
While there has been a relatively significant increase, this financial inclusion has not yet reached the majority of Indonesia’s low-income population, Wijaya said.
ICS measures the creditworthiness of prospective customers who face limitations in accessing financial services by using artificial intelligence, machine learning, and non-traditional data, such as social media data, e-commerce transactions, and household bill data.
ICS service providers usually create a contract with financial institutions — fintech or traditional financial institutions — as data users that store, control usage, and process personal data in ICS.
ICS acts like a third-party data processing application and evaluates consumers' worthiness using the anonymity method.
It also enables soft credit, which supports pay-later transactions without credit cards and formal credit schemes.
Financial transactions such as this could attract customers' interest and, in the end, increase sales volume.
"This service targets daily workers with limited credit access to conduct a purchase. There is a flexibility being offered, thus they can regulate their finance according to need," Wijaya explained.
However, she highlighted several risks involved in using ICS such as the use of personal data and bias in algorithms. (INE)
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Translator: Sanya Dinda S, Fadhli Ruhman
Editor: Atman Ahdiat
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