How Indonesian financial institutions use civil registration to reduce fraud

Indonesian financial institutions work closely with the Directorate of Population and Civil Registration (Dukcapil) of the Ministry of Home Affairs (Kemendagri) to mitigate fraud. Through this collaboration, financial institutions can verify the data of prospective customers before granting credit or loans. Financial institutions can now conduct field verification and data verification by using data from Civil Registration.

This collaboration actually began two years ago. Dukcapil provides access to institutions to utilize population identification numbers (NIK), population data, and electronic KTP (e-KTP). Quoted from Kontan (29/09), a director of a consumer financing company admitted that Dukcapil’s data were very beneficial for his company. It can be seen from how the company’s NPF (Non-Performing Financing) has been declining since 2017.

Fraud is commonly indicated by duplicating ID cards. For example, a fraudster uses someone else’s ID and replaces the photo. Quoted from Kontan (29/09), the Director General of Dukcapil Kemendagri Zudan Arif Fakhrulloj said, “The modus operandi is the perpetrators change the picture on the ID’s for renting cars or applying for loans. ”

Generally, perpetrators use other people’s credentials such as KTP numbers and even credit cards which are available across the internet. Such data have been leaked on the internet before they are used by the perpetrators.

The data from Dukcapil allows the institutions to check with two indicators. For example, prospective customers must show their ID card numbers and telephone number. That way, verification yields more accurate results. With more accurate verification, financial institutions can reduce default risk.

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