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Digital Financial Risk Control: Challenges and Innovation In The Modern Financial System

Introduction

Digital financial risk control: challenges and innovation in the modern financial system. Explore digital financial risk control in Indonesia's fintech & crypto. Addresses cyber threats, fraud, and regulatory challenges. Highlights RegTech, SupTech, AI for a secure, inclusive digital system.

Abstract

The rapid expansion of Indonesia’s digital financial ecosystem has significantly advanced financial inclusion and innovation through the growth of fintech platforms, digital payments, and crypto-asset adoption. However, this transformation introduces multifaceted risks, including cyber threats, data breaches, digital fraud, regulatory uncertainty, and money-laundering vulnerabilities associated with crypto-assets and decentralized finance. This study employs a systematic literature review to examine the challenges and innovations in digital financial risk control within Indonesia’s fintech and digital asset sectors. Findings indicate that effective risk mitigation relies heavily on regulatory coordination, advanced supervisory technology, consumer digital literacy, and robust data protection practices. RegTech and SupTech innovations powered by artificial intelligence support real-time risk monitoring and enhance compliance with global standards such as FATF recommendations. Nevertheless, successful digital financial governance also requires algorithmic accountability and ethical technology deployment. This study underscores that safeguarding stability, trust, and consumer protection is essential to achieving a secure and inclusive digital financial system while enabling responsible innovation.

Review

The paper "Digital Financial Risk Control: Challenges and Innovation In The Modern Financial System" addresses a critically important and timely subject: the burgeoning digital financial ecosystem in Indonesia and the associated risks. The abstract clearly articulates the study's focus on the rapid expansion of fintech, digital payments, and crypto-asset adoption, which, while fostering financial inclusion, simultaneously introduces significant vulnerabilities such as cyber threats, fraud, and regulatory ambiguity. Employing a systematic literature review, the research aims to provide a comprehensive overview of the challenges faced in digital financial risk control within Indonesia's specific context, making it highly relevant for understanding emerging market dynamics in this space. The study's findings offer valuable insights into effective risk mitigation strategies. It identifies that robust digital financial governance necessitates a multi-pronged approach, emphasizing regulatory coordination, the adoption of advanced supervisory technologies (SupTech), enhanced consumer digital literacy, and stringent data protection protocols. A significant contribution lies in highlighting the transformative potential of RegTech and SupTech, particularly those powered by artificial intelligence, for enabling real-time risk monitoring and ensuring compliance with international benchmarks like FATF recommendations. Furthermore, the abstract underscores the critical, yet often overlooked, aspects of algorithmic accountability and ethical technology deployment as integral components of a secure digital financial system. The research makes a strong case for proactive and innovative approaches to digital financial risk control, positioning consumer protection, trust, and systemic stability at the forefront of policy considerations. Its strength lies in synthesizing existing literature to provide a holistic view of both problems and solutions within a dynamic sector. While the abstract points to algorithmic accountability and ethical tech deployment, a full paper would ideally elaborate on how these are currently addressed or propose specific frameworks for their implementation, which could be a natural extension for future empirical work. Ultimately, this study serves as a crucial resource for policymakers, regulators, and industry stakeholders striving to cultivate a secure, inclusive, and responsibly innovative digital financial landscape in Indonesia and other rapidly digitizing economies.

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