As online lending grows so too does cybercrime

Jakarta, Nov 18 (360info) Online lending, or "pinjol," has grown quickly since COVID-19, as people under financial strain seek new ways to deal with their hardship.     Its accessibility, quick approvals and relatively minimal requirements make online lending popular.
    As of June 2024, according to Indonesia's Financial Services Authority (Otoritas Jasa Keuangan or OJK), there were 19.5 million active loan accounts across the country, totalling Rp.66.79 trillion (USD US4.1 billion).
    There are two types of online lending in Indonesia: legal and illegal.
    Legal lenders must follow strict regulations, including maintaining offices, transparent organisational structures and clear interest rates, as well as defined practices for calculating interest and managing collections.
    Illegal lenders, however, often exploit borrowers with excessive administrative fees, exorbitant interest rates, limitless fines and practices that easily turn to harassment or intimidation.
    Illegal online lending poses significant risks, often involving high interest rates, steep administrative fees, short repayment deadlines and potential misuse of personal data.
    The ease of access to funds, combined with the misuse and vulnerability of personal data, contributes to fraud and cybercrime, leaving borrowers exposed to financial and privacy risks.
    
     Increase in complaints
    
     While Indonesia's Financial Services Authority regulates legitimate online lending platforms, rising demand has fuelled the growth of unregulated, illegal lenders.
From January to July 2024, authorities received 9,596 complaints about illegal lending. Many users, often unaware of the risks and terms, continue to rely on these platforms without fully understanding their implications.
    Tech advances, while enhancing communication and consumer access, have also opened new avenues for cybercrime.
    Money laundering, stolen PINs for bank transactions, credit card fraud, SIM card exploitation and unauthorised access to computer systems and bank accounts, are common.
    Data breaches are particularly problematic. Sensitive personal information — ID cards, tax IDs, photos — can be accessed and distributed without consent. This unauthorised distribution of private data constitutes a serious breach of privacy and falls under cybercrime.
    
     Lifestyle and debt
    
     It's not only those facing cost of living pressures who are tempted by online lending.
    The lure of a hedonistic lifestyle can lead many people to take on loans despite financial strain and the risk of deepening debt.
    This cycle highlights how the pursuit of immediate pleasure, supported by easily accessible online credit, has woven hedonistic values into everyday financial decisions.
Generation Z is particularly susceptible to online lending due to their spending habits, which often prioritise lifestyle and consumption over saving or investing.
    This focus on hedonic consumption drives many to rely on online loans to support their lifestyle choices. According to recent data, more than 9.4 million accounts belonging to Generation Z and millennials are active recipients of online loans, reflecting how these financial habits are impacting younger generations.
    
     Knowing the risks
    
     With more people turning to online loans, the habit of using illegal lenders persists. However many borrowers remain unaware of the serious financial risks.
    High interest rates and short repayment periods mean borrowers can quickly find themselves in a cycle of debt, often needing to repay one loan by taking out another.
    In some cases, additional loans are never disbursed, yet lenders still attempt to collect payments, sometimes resorting to harassment and the misuse of personal data.
Operating remotely, these illegal lenders are difficult to trace, and from 2017 to July 2024, authorities uncovered 9,180 such operations across Indonesia.
    Many Indonesians fall victim to illegal lending schemes because of ignorance of sound financial management. Some reports describe illegal lending operations where individuals unwittingly receive funds just by registering, thus incurring debt they never intended to take on.
    Researchers advise the public to avoid registering with illegal lending platforms, as these activities can lead to financial instability, personal data misuse and further legal troubles. (360info.org) NSA
NSA

(This story has not been edited by THE WEEK and is auto-generated from PTI)