In mid-2019, Dewi* suddenly found herself sitting on a debt of IDR 10 million ($736.30)—not a small amount for a Grab driver in Pontianak, the capital of Indonesia’s West Kalimantan province. More worryingly, she couldn’t even remember applying for a loan.

When several of her friends complained about receiving similar, inexplicable debt notices from a bank, it dawned on them that they had been scammed. Someone had borrowed money using their identities.

Dewi and her friends were eventually able to piece together what had happened. A few months prior, they had received an invitation via a WhatsApp group to a meeting where they were promised IDR 100,000 ($7.36) in exchange for an image of their identity cards and a photo of each person holding their IDs. They consented, oblivious to the dangers of giving away such personal data.

A fraudster then used these ID documents to set up accounts under the victims’ names on an online travel platform and purchased vouchers on credit. The fraudster then sold these vouchers on another website and made off with the cash. He managed to skim IDR 350 million ($25,633) off the platform using the identities of about 70 people in this manner, according to a police report filed last July.

Identity fraud schemes like these are a major problem in Indonesia’s fledgling online lending space. A new breed of lending platforms allows borrowers to apply for credit and loans digitally, without ever having to interact face-to-face with a bank clerk.

This led to a rise in fraud and fraud attempts, according to several platform owners and members of Indonesia’s association of fintech lending platforms (AFPI) The Ken spoke to. A major lender wrote off 20,000 loans based on fake IDs not long ago, according to an executive of a fintech company who requested anonymity as they were not authorised to speak to the media.

What made matters worse was that the platforms were not telling each other about customers who defaulted on their loans. The platforms were too caught up in their own ambitious expansion plans.

With

roughly half The Global Findex database The Global Findex database is the world’s most comprehensive data set on how adults save, borrow, make payments, and manage risk Read more roughly half

of Indonesia’s 189 million people aged 15 and above still underserved by banks, online lenders are trying to fill an estimated

credit gap Credit Gap Credit gap refers to the amount of credit individuals and small businesses could productively put to use if banks gave them a chance. Traditional banks tend not to deal with small clients because it’s not lucrative enough for them credit gap

of $70 billion, according to a 2017 estimate by the Indonesian financial services authority, OJK (Otoritas Jasa Keuangan).