I. Executive Summary

The rapid advancement of financial technology in Indonesia has significantly reshaped the payment system, with the Paylater service emerging as a widely used digital credit solution. Unlike traditional financial institutions regulated by FSA, Paylater operates within fintech ecosystems, allowing users to defer payments without requiring a physical card.

While Paylater shares similarities with credit cards, it differs in terms of accessibility, credit limits, and regulatory oversight. It is primarily offered by fintech companies or financing institutions, each governed by different regulatory frameworks—namely, FSA Regulation 10/2022 for technology-based co-funding services (LPBBTI) and FSA Regulation 35/2018 for financing companies. Additionally, Bank Indonesia Regulation 23/2021 regulates Paylater as part of payment service providers (PJP).

Despite its convenience, Paylater presents legal and financial risks for consumers. Defaulting on payments can lead to high-interest penalties, damage to credit scores recorded in Indonesia’s Financial Information Service System (SLIK), and even lawsuits. Debt collection is regulated under FSA Regulation 22/2023, which mandates ethical collection practices and prohibits unlawful enforcement, such as asset seizure. However, Paylater providers often lack effective legal recourse for recovering small loan amounts due to high litigation costs.

To mitigate risks, consumers should carefully read Paylater terms to avoid unexpected fees and legal risks, verify provider legitimacy, and communicate financial difficulties for possible solutions. Providers should minimize defaults through credit assessments, appropriate limits, and efficient debt recovery while considering alternative dispute resolution. Regulators must ensure compliance, raise awareness of responsible borrowing, and establish debt recovery regulations for small loans while strengthening actions against illegal lenders.

II. Background

    The development of financial technology has significantly transformed the payment system in Indonesia. Bank Indonesia has stated that the rapid development of this sector raises concerns regarding potential risks to the stability of Indonesia’s financial system.[1] One increasingly popular innovation is the Paylater service, a digital credit line that enables consumers to conduct transactions without making immediate payments and to defer payment to a predetermined time.[2] Paylater is a financial feature, not a financial services institution regulated by the Otoritas Jasa Keuangan/Indonesia’s Financial Services Authority (“FSA”). Since Paylater is not classified as a financial institution, it is not subject to the same level of regulatory oversight as banks or licensed loaners. With its rising trend in Indonesia and its common use for transactions similar to those made with a credit card, it is imperative to understand its legal implications in daily life.

Paylater is comparable to credit cards, but they are not the same.[3] The primary differences lie in its card facility, credit limit, and application process. Paylater currently operates as a fully digital service, meaning there is no physical card available for use like a credit card. Consumers can only access Paylater through the designated app and use it within its ecosystem. The credit limit for Paylater is significantly lower than that of a credit card. This makes it ideal for small, everyday transactions, and the limit can increase based on the user’s payment behavior. Having no outstanding balance can positively impact the limit. Lastly, the Paylater application process is much simpler than that of a credit card. Typically, consumers are required to submit an application by providing personal information, official identification, and undergoing verification—all conducted digitally. This ease of application is reflected in the lower credit limits compared to credit cards, which in turn correlates with the level of risk borne by Paylater providers. For detailed comparison, please refer to the chart below:

 

Aspect	Paylater	Credit card
Provider	Fintech (LPBBTI), Financing Companies, Banks	Banks or Financial Institutions
Type of Facility	Technology-based financing (Short-term loan)	Card-based credit with a predetermined credit limit
Payment System	Fixed installments or full payment within a certain period	Minimum or full payment each month
Application Requirements	Easier, often requiring only an ID card and an e-commerce account	Stricter process, requiring financial documents such as payslips and credit history
Credit Limit	Relatively lower	Higher, adjusted to the cardholder’s financial profile
Interest & Fees	Generally higher, varying depending on the provider	Lower than Paylater, but includes annual fees and interest if not paid in full
Accessibility	Integrated with e-commerce platforms or specific apps	Can be used at various merchants, both online and offline, domestically and internationally
Regulation	Supervised by the FSA based on the type of provider (LPBBTI or Financing Company)	Supervised by the FSA and regulated under banking laws

The rapid adoption of Paylater has introduced both financial and legal risks for consumers. While these services offer instant access to funds, they often lead to legal disputes related to late payments, high-interest rates, and unfair debt collection practices. Many consumers, unaware of the full terms and conditions, face legal repercussions such as penalties, credit score deterioration, and even lawsuits for defaulting on their payments. This legal article aims to explore how Indonesia regulates the rise of Paylater, providing a brief analysis of the existing legal framework and legal implications of consumer default due to late or non-payment.

III. Analysis

A. Regulatory Framework Governing the Paylater  Services

    There are two crucial regulations that regulate Paylater: the first is through Information Technology-Based Co-Funding Services, and the second is through Financing Companies. The first is regulated under the provisions governing application-based or electronic loan services as stipulated in Regulation of The Financial Services Authority No. 77/POJK.01/2016 of 2016 on Technology-Based Fund-Lending Services, which has been revoked and replaced by Regulation of the Financial Services Authority No. 10/POJK.05/2022 of 2022 on Information Technology-Based Co-Funding Services (“FSA Regulation 10/2022”). It is important to note that in order to accommodate both Sharia principles and conventional business activities, the terminology used for “lending” or “loan” has been amended by FSA Regulation 10/2022 to “Information Technology-Based Co-Funding Services” (“LPBBTI”), this term varies across multiple regulations that govern loan.[4]

LPBBTI is the provision of financial services to bring together funders and fund recipients in conducting conventional funding or based on sharia principles directly through an electronic system using the internet. Paylater provider is called LPBBTI Organizer (“Organizer”), Organizer is an Indonesian legal entity that provides, manages, and operates LPBBTI either conventionally or based on Sharia Principles. FSA Regulation 10/2022 has regulated the current regulatory framework for peer-to-peer (“P2P”) lending services in Indonesia. Article 32 paragraph (2) of FSA Regulation 10/2022 allows Paylater transactions to involve collateral. However, Paylater features are generally practiced without collateral.

The second is regulated in Regulation of the Financial Services Authority No. 35/POJK.05/2018 of 2018 on The Organization of The Business Activities of Financing Companies, as lastly amended by Regulation of the Financial Services Authority No. 46 of 2024 on Development and Strengthening of Financing Companies, Infrastructure Financing Companies, and Venture Capital Companies (“FSA Regulation 35/2018”), states that a Paylater provider is categorized as a Financing Company. This distinction arises because Paylater itself is merely a feature that can be managed by both Fintech companies (LPBBTI) and Financing Companies. For example, SPayLater, a well-known Paylater provider managed by PT Commerce Finance, is a Financing Company with license no. KEP-354/KMK.013/1992.[5] Conversely, OVO Paylater, managed by PT Indonusa Bara Sejahtera, is an LPBBTI Organizer with license no. KEP-19/D.05/2020.[6]

PT Commerce Finance is a Financing Company (Multifinance) engaged in Consumer Financing, Leasing, and Factoring. Meanwhile, PT Artha Dana Teknologi is a Financial Technology Company that provides Technology-Based Money Lending Services, commonly known as P2P Lending. Both companies are registered in the list provided by the FSA, and their classifications indicate no similarity in category. Please refer to their difference below to understand:

Aspect	PT Commerce Finance	PT Indonusa Bara Sejahtera
Business Category	Financing Company (Multifinance)	Fintech Lending (P2P Lending)
Business Model	Uses its own capital or funds from financial institutions to provide consumer financing, leasing, and factoring.	Facilitates technology-based lending by connecting lenders (individuals or institutions) with borrowers.
Regulation	Regulated by FSA Regulation 35/2018.	Regulated by FSA Regulation 10/2022.
Source of Funding	From its own capital or loans from other financial institutions.	From lenders (individuals or institutions) participating through the P2P lending platform.
Example of Services	SPayLater	OVO Paylater

The spokesperson for the FSA, Sekar Putih Djarot, states that “In Indonesia, Paylater can be facilitated by several financial institutions, such as banks, financing companies, or fintech peer-to-peer lending platforms. Essentially, Paylater is a service that allows users to defer payments or take on credit, which must be repaid at a later date”.[7] This means that both categories can be Paylater providers, each with its own regulation.

Another regulation that governs Paylater is Bank Indonesia Regulation No. 19/12/PBI/2017 of 2017 on Organization of Financial Technologies, which has been revoked and replaced by Regulation of Bank Indonesia Number 23/6/PBI/2021 of 2021 on Payment System Service Providers (“BI Regulation 23/2021”). The term used to refer to lenders/loaners is Payment Service Providers (“PJP”). PJP are banks or non-bank institutions that provide services to facilitate payment transactions for service users. Article 2 paragraph (1) of BI Regulation 23/2021 stated that PJP organizes the following activities:

1. Providing information on Sources of Funds;
2. Payment initiation and/or acquiring services;
3. Administration of Sources of Funds; and/or
4. Remittance service.

Payment initiation and/or acquiring services activities as referred to in Article 2 paragraph (1) encompasses the forwarding of payment transactions, such as:

1. Store Sources of Funds data and/or access to Sources of Funds, including providing a platform to facilitate users to store Sources of Funds data and/or access to Sources of Funds;
2. Process payment transactions using various instruments;
3. Acquire goods and/or service providers;
4. Bail out payments to goods and/or services providers; and/or
5. Forward the funds (disbursement) to Goods and/or Services providers.

Even if an agreement for the loan is made online, the applicable legal provisions for online agreements are the same as those for direct agreements. Rights and obligations of consumers and Paylater providers were written based on electronic agreement between both parties regulated in Article 1320 of the Indonesian Civil Code (“ICC”).[8] Fundamentally, there is no difference in the mechanism or substance of a direct or indirect agreement, the only distinction lies in the platform used. Therefore, both direct and indirect agreements have the same legal force. In order for an agreement to be valid, an agreement must satisfy the following four conditions:

1. There must be consent of the individuals who are bound thereby;
2. There must be capacity to conclude an agreement;
3. There must be a specific subject;
4. There must be an admissible cause.

This article stipulates that, for the transaction to be valid, there must be mutual consent from both parties. The parties must also possess the legal capacity to enter into the agreement, as individuals incompetent to conclude agreements are specified in Article 1330 of ICC. A specific subject is required for the agreement, in this case, is the Paylater feature. Lastly, there must be confirmation that the cause is permissible and does not violate the applicable law.[9]

 

B. Legal Implications of Consumer Default Due to Late/No Payment

     Taking a source from one of the reputable Paylater providers in Indonesia, SPayLater, default due to late payment will result in additional fees/interest and access restrictions. This is legal based on Article 1243 of the ICC, which elaborates on fines imposed on consumers who default based on the agreement that the consumer has read and approved. Furthermore, the default will also affect the consumer’s credit score in the Financial Information Service System/Sistem Layanan Informasi Keuangan (“SLIK”) by the FSA. Based on FSA Regulation No.  64/POJK.03/2020 of 2020 on Amendment to Regulation of The Financial Services Authority Number 18/POJK.03/2017 on Reporting and Request Of Debtor Information Through The Financial Information Service System (“FSA Regulation 64/2020”), SLIK is an information system managed by FSA to support the implementation of duties of supervision and information services in the financial sector. A credit score recorded in SLIK is a record of information regarding the credit history of debtors from banks and other financial institutions. Having a bad credit score recorded in SLIK may result in restrictions on other financial access, such as but not limited to difficulties in applying for a mortgage, impacts on employment opportunities, and challenges in obtaining credit access from banks and financial institutions in the future.

Breach of contract is one of the most common occurrences that cause losses to Paylater providers. With installment periods varying from 3, 6, 12, 18 months, and beyond, the risk exposure for Paylater providers is significant. A frequent issue in debt recovery efforts is the seizure of a consumer’s assets on the grounds of default. Is this legally permissible?

Consumers who fail to repay credit loans without collateral, such as Paylater, may face debt collection procedures by Paylater providers and/or debt collectors. Article 61 of Regulation of the Financial Services Authority No. 22 of 2023 on Consumer and Public Protection in The Financial Services Sector (“FSA Regulation 22/2023”) states that every Financial Services Business Actor (“PUJK”) may cooperate with other parties to conduct the function of collecting credit or financing from consumers. It is mandatory for PUJK to provide a reprimand letter in accordance with the period in the agreement. The reprimand letter as referred to must contain at least the following information:

1. Due date in accordance with the agreement;
2. Number of days of late in the payment of obligations;
3. Outstanding principal;
4. Economic benefits of funding;
5. Payable fines and/or payable compensations.

For the debt collector entity, they must be incorporated as a legal entity, must have a license from the competent authority, must have human resources that have obtained certification in the collection sector from a professional certification body and/or organizing association registered with the FSA. Article 62 of FSA Regulation 22/2023 regulates that every PUJK must ensure that the collection of credit or financing to consumers is implemented in accordance with the norms applicable in the community and provisions of laws and regulations. This means ensuring that collection is conducted:

1. By not using threats, violence, and/or actions that embarrass consumers;
2. By not using physical or verbal pressure;
3. Not to parties other than consumers;
4. By not continuously disturbing;
5. At the consumers’ collection address or domicile;
6. Only from Monday until Saturday outside national holidays from 08.00 – 20.00 local time;
7. In accordance with provisions of laws and regulations.

It can be concluded that debt collectors are allowed to open negotiations with consumer either by online or visiting their residence. However, debt collectors may not enforce execution by force or seize the consumer’s assets. There is indeed a pitfall for Paylater provider which lacks reactive protection instead of prevention. While prevention protection is supported by SILK and various administration sanctions, reactive protection is far less limited and recovery is not guaranteed. In this case, consumers must be prepared to accept the consequences of submitting personal data to the FSA and being blacklisted by financial institutions if they fail to repay their online loan installments. Personal data included in the blacklist may make it difficult, if not impossible, to obtain financial assistance from financial institutions in Indonesia.[10]

From a practical standpoint, it is uncommon for Paylater providers to initiate a lawsuit for an insignificant loan amount. Since the Paylater limit is far lower than that of a credit card, default cases usually involve small amounts of total loans. Filing a lawsuit can be more expensive and time-consuming for Paylater providers, leading them to seek alternative methods to recover their funds. Instead, Paylater providers usually file lawsuits only for large loan amounts, as the total loan recovered can cover the time and cost of the legal proceedings. This leaves Paylater providers lacking legal protection and certainty to recover their money for small amount of loan.

If you wish to verify whether a Paylater provider is legal and supervised by the FSA, you can check their company registration through the following links:

• Financing Companies:

https://www.ojk.go.id/id/kanal/iknb/data-dan-statistik/direktori/lembaga-pembiayaan/Pages/Direktori-Lembaga-Pembiayaan-dan-Perusahaan-Modal-Ventura-Desember-2024.aspx

• Fintech P2P Lending:

https://www.ojk.go.id/id/kanal/iknb/data-dan-statistik/direktori/fintech/Default.aspx 

Please note that the Paylater brand name may differ from the company that manages it and not all the companies listed provide Paylater services.

IV. Suggestion and Recommendation

Consumers should always read and understand the terms and conditions before using Paylater services to avoid unexpected fees and legal consequences. If facing financial difficulties, it is advisable to communicate with the Paylater provider to explore possible solutions, such as restructuring the payment plan. Additionally, consumers should verify the legality of Paylater providers through official FSA directories to avoid scams and illegal lending practices.

For Paylater providers, strengthening preventive measures, such as conducting credit assessments via the SLIK system, can help minimize default risks. The credit score can also be used to determine the appropriate limit for consumers by giving extra time before approval. Although having collateral would be the best recommendation, Paylater services rarely use this method, as their key characteristic is providing loans in a simple and fast manner. Moreover, providers should improve and supervise reactive protection strategies by implementing efficient and legally compliant debt recovery mechanisms. Given that lawsuits may not be cost-effective for small loan amounts, alternative dispute resolution methods should be considered before resorting to legal action.

Regulators, including the FSA and other relevant authorities, should continue monitoring and supervising Paylater providers to ensure compliance with consumer protection regulations. Public awareness campaigns on responsible borrowing and the risks of defaulting on digital loans should be intensified. In the near future, a regulation governing the debt recovery procedure for low-amount debt should be established to protect Paylater providers. Leaving these small debts unrecovered will ultimately create a bigger financial problem. Lastly, enforcement actions against illegal lending practices must be strengthened to protect consumers from financial exploitation.

If you have any problems or would like to discuss this matter further, feel free to contact cr@lawyerindo.

[1] Budhijanto, D. (2019). Hukum Ekonomi Digital di Indonesia. Bandung: Logoz  Publishing. 162.

[2] Pratika, et.al. (2021). Analysis of Pay Later Payment System. Journal of Economics, Business, and Accountancy Ventura, 332.

[3] Novendra, B., & Aulinisa, S. S. (2020). Buy Now, Pay Later’s Concept and Comparison with Banking Credits in Indonesia: An Inevitability In Digital And Technology Era. Jurnal Rechtsvinding, 194-198.

[4] Otoritas Jasa Keuangan (2024). Layanan Pendanaan Bersama Berbasis Teknologi Informasi (LPBBTI). Retrieved February 11, 2025, from ojk.go.id: https://ojk.go.id/id/kanal/iknb/financial-technology/default.aspx

[5] OJK. (2024, December). Pelaku Lembaga Pembiayaan dan Modal Ventura. Retrieved February 19, 2025, from www.ojk.go.id: https://www.ojk.go.id/id/kanal/iknb/data-dan-statistik/direktori/lembagapembiayaan/Documents/Direktori%20Lembaga%20Pembiayaan%20dan%20PMV%20-%20Desember%202024.pdf.

[6] OJK. (2024, December). Perusahaan Fintech Lending Berizin. Retrieved February 19, 2025, from https://www.ojk.go.id/id/kanal/iknb/data-dan-statistik/direktori/fintech/Documents/Penyelenggara%20Fintech%20Lending%20Berizin%20di%20OJK%20per%2031%20Desember.pdf.

[7] Rizki, M. J. (2022, June 23). Mengenal Seluk-beluk Metode Pembayaran Paylater. Retrieved February 21, 2025, from hukumonline.com: https://www.hukumonline.com/berita/a/mengenal-seluk-beluk-metode-pembayaran-paylater-lt62b38de487e65/?page=1

[8] Anggreni, P. S., & Dwijayanthi, P. T. (2024). Pengaturan Sistem Paylater Dalam Transaksi Pembelian dan Penjualan Online Pada Marketplace. Jurnal Kertha Semaya, 1488.

[9] Lie, C., et.al. (2023). Pengenalan Hukum Kontrak dalam Hukum Perdata Indonesia. Jurnal Kewarganegaraan, 922.

 

[10] Jaelani, E., et.al. (2022). Penyelesaian Sengketa Jika Terjadi Wanprestasi Dalam Pinjaman Online. Jurnal Transparansi Hukum, 10-11.