In recent years, Indonesia’s financial landscape has undergone a significant transformation. Today, the sector is energized by two major financing options: multifinance companies and fintech (financial technology).
Although both operate in the financial services industry, they are far from identical. There are several key differences between multifinance and fintech that are important to understand. This article explores those distinctions in detail, let’s take a closer look.
What Is Multifinance?
A multifinance company is a non-bank financial institution that focuses on providing loans or financing services to customers. This is regulated under OJK Regulation No. 29/POJK.05/2014 and No. 35/POJK.05/2018 on the Operation of Financing Companies.
Multifinance companies offer financing products to support both productive and consumptive needs. These companies operate with official licenses from the Financial Services Authority (OJK), although they are not allowed to accept public deposits.
Types of financing typically offered include investment financing, working capital financing, and multipurpose financing. When issuing credit, the multifinance company disburses funds directly to the merchant selling the goods or services the customer intends to purchase.
In other words, multifinance companies do not provide direct cash loans. Instead, they provide financing, and the customer repays the installment amount according to the agreed terms.
What Is Fintech?
Fintech (financial technology) refers to technological innovations in financial services. Fintech continues to expand and accelerate the shift from traditional financial practices to modern, digital-based systems.
As a result, financial management and transactions can now be accessed easily and quickly from anywhere, at any time. Through digital solutions, fintech enhances financial services with greater convenience and efficiency.
Fintech encompasses a wide range of products, including peer-to-peer lending, insurtech, digital banking, capital market platforms, digital payments, supporting fintech services, and other financial innovations.
In Indonesia, fintech is widely available through e-wallets, online lending platforms, digital payment services, investment apps, and more.
Key Differences Between Multifinance and Fintech
Although both sectors operate in the financial services industry, and sometimes even collaborate, multifinance and fintech differ in several important ways:
1. Business Structure and Operations
Multifinance companies operate physically with branch offices and agents, offering financing for needs such as education, vehicle purchases, or home renovations.
Fintech, on the other hand, operates entirely digitally. All transactions are conducted via websites or mobile applications.
2. Collateral Requirements
Most multifinance loans require physical collateral, such as vehicle ownership documents (BPKB), property certificates, and other assets.
Fintech generally does not require collateral, although some platforms do for large loan sizes (up to IDR 2 billion), based on OJK guidelines.
3. Creditworthiness Assessment
Multifinance companies rely on official credit reports such as the OJK Financial Information Services System (SLIK) to assess borrower eligibility.
Fintech platforms use advanced technology, machine learning, big data, and artificial intelligence (AI); enabling a faster, automated credit scoring process.
4. Sources of Funds
Multifinance companies obtain their funding from bank loans, internal capital, and bond issuance.
Fintech platforms are funded by investors, owners’ capital, or operate under a peer-to-peer (P2P) lending model.
5. Risk and Risk Management
In fintech lending, credit risk is borne by investors. Risk assessment is conducted through digital data analytics, including online behavior scoring. However, fintech typically reports higher default rates compared to traditional financing institutions.
In multifinance companies, the risk of borrower default is borne by the company itself. Their risk management procedures are more conservative due to the need to maintain long-term financial stability.
6. Regulation and Oversight
Both multifinance and fintech are supervised by the OJK, but they operate under different regulations.
Fintech has more advanced digital complaint-handling systems, though both sectors prioritize consumer protection.
For fintech, regulations continue to evolve alongside technological advancements. Online lending fintech is governed under OJK Regulation No. 40 of 2024 on Technology-Based Joint Financing Services.
Multifinance companies must comply with numerous standards relating to capital, corporate governance, and risk management, including POJK No. 35/POJK.05/2018, POJK No. 46 of 2024, and POJK No. 48 of 2024.
7. Use of Technology
Multifinance companies still handle many manual processes, such as collecting physical documents, conducting in-person verification, and requiring physical signatures. However, digitalization efforts are growing steadily.
Fintech is heavily technology-driven, relying on big data, digital behavior analytics, and AI. With automated systems, processes like online verification become faster and more efficient.
8. Customer Experience
Multifinance offers a more structured, hybrid experience combining online applications with mandatory physical meetings for verification and contract signing.
Fintech provides an entirely digital experience; practical, instant, and fully remote, from registration to verification and disbursement.
Understanding the definitions and differences between multifinance and fintech can help you make better financial decisions that match your needs and risk profile.
If you need financing, BFI Finance is ready to help. Simply use your House/Shop Certificate, Motorcycle BPKB, or Car BPKB as collateral. BFI Finance offers practical and reliable solutions for fast funding needs.
All transactions at BFI Finance are carried out with full transparency, backed by official licensing and supervision from OJK, ensuring clear legal compliance. Apply for your financing today, because #SelaluAdaJalan with BFI Finance.
