Online Loans, Paylater, and the Debt Trap Facing Young Indonesians

The problem is not limited to the youngest borrowers. OJK data as of March 2025 showed that total outstanding individual online loans reached Rp75.44 trillion, with bad loans amounting to Rp1.65 trillion. Borrowers aged 19 to 34 held Rp37.87 trillion of that total through 14 million active accounts.

Six months later, as of March 2026, total outstanding online loans had reached Rp101.03 trillion. Non-performing loans continued to be dominated by borrowers aged 19 to 34, accounting for 48.65 percent of all bad loans.

This figure needs to be read carefully. Some reports state that young people contribute up to 90 percent of bad loans, but that figure includes the broader productive-age group of 19 to 54 years old. This article uses OJK’s more specific figure for the 19 to 34 age group to avoid overstating the issue.

The overall bad loan ratio, or 90-day default rate known as TWP90, also increased from 2.77 percent in March 2025 to 4.52 percent in March 2026. OJK reported that 16 online lending platforms already had TWP90 levels above five percent. According to OJK, these non-performing loans are “dominated by the consumptive sector, as it relies heavily on personal income and cash flow, making it more sensitive to repayment capacity.”

Beyond online loans, another debt instrument is growing even faster: buy now, pay later, or BNPL. According to PEFINDO Biro Kredit, also known as IdScore, Indonesia had 17.26 million paylater borrowers as of February 2025, up 25.53 percent year-on-year, with total credit disbursement reaching Rp36.24 trillion. This figure covers multiple segments, including both banking and financing companies.

For one segment, OJK data showed that outstanding BNPL debt from banks had exceeded Rp22.7 trillion as of March 2025, rising more than 30 percent year-on-year.

By January 2026, banking BNPL had reached Rp27.1 trillion, with 31.23 million active accounts. BNPL from financing companies grew even more aggressively, rising 71.13 percent year-on-year to Rp12.18 trillion.

As of March 2026, paylater financing from financing companies grew 55.85 percent year-on-year to Rp12.81 trillion. It is important to note that this figure only covers financing companies and does not include banking BNPL, which was much larger at Rp27.1 trillion as of January 2026. In other words, this growth signals acceleration, not a decline from the earlier Rp36 trillion figure, which used a broader scope. OJK noted that part of the increase was driven by higher financing demand during Ramadan and Eid.

OJK has also warned that multi-account BNPL ownership may increase default risk because a borrower’s total obligations can exceed their actual financial capacity. Agusman, OJK’s Chief Executive of Financing Institutions Supervision, stated this in an official statement in May 2026.

Starting July 31, 2025, all paylater providers are required to report credit data to OJK’s Financial Information Services System, known as SLIK, the equivalent of conventional BI Checking. This means every paylater delinquency is now officially recorded and may affect future mortgage or vehicle loan applications.

The maximum interest rate for consumptive paylater products is also being reduced gradually, from 0.3 percent per day in 2024 to 0.2 percent in 2025, and then to 0.1 percent per day starting January 1, 2026.

These regulatory changes are important consumer protection measures. However, regulation does not erase the fact that millions of young Indonesians already have active credit accounts, and some have already defaulted. The poor credit records they carry today may follow them when they apply for a mortgage in their thirties.

The easiest explanation is to say that young Indonesians are simply overspending. But the data tells a more complex story.

In 2025, unemployment among Gen Z in Indonesia was reported to be around 17 percent, according to the Indonesian Employers Association, Apindo. This was far above the national unemployment rate, which declined to 4.7 percent.

Even among those who are employed, financial margins are thin. A large share of their salary is not necessarily spent on luxury, but on the basic cost of living in major cities, including rent, transportation, and daily needs. When stagnant income meets rising living costs, the room for saving becomes extremely limited. Digital credit then becomes a way to bridge the gap.

Friderica Widyasari Dewi, OJK’s Chief Executive of Financial Services Business Conduct Supervision, captured this tension clearly when she said that young Indonesians are “very digitally literate, but not yet financially literate.” This combination makes them vulnerable to credit products that are easy to access but whose risks are not fully understood.

The growing discussion around doom spending is also not merely about a consumptive lifestyle. Analysis published in Kompasiana in August 2025 argued that this behavior emerges from real pressures such as job uncertainty, rising living costs, and a future that feels increasingly out of reach even when young people try to save. In this context, spending becomes a response to stress, not just a pursuit of pleasure.

For brand executives, young consumers’ purchasing power is increasingly unstable. They may buy with paylater today, but their ability to repay next month depends on uncertain employment and income conditions. High default rates can affect the broader credit ecosystem that supports digital transactions.

For policymakers, SLIK reporting and interest rate caps are important steps in the right direction. But without intervention on income resilience and financial literacy, young people will continue to use digital credit as a bridge between insufficient wages and rising living costs.

This is not a story about the character of one generation. It is about a system that gives easy credit access to one of the most financially vulnerable groups, without equally ensuring that they understand the long-term consequences.

The question is no longer whether this is a problem. The question is who will bear the cost.

Sources

CNBC Indonesia (November 2025). “Thousands of Young Indonesians Trapped in Bad Online Loans, the Surge Is Alarming!” OJK data as of August 2025.

Detik Finance (June 2025). “Digital Generation, Brutal Debt: 90% of Bad Loans Come from Young People.” OJK data as of March 2025.

CNBC Indonesia (May 2026). “Gen Z and Millennials Dominate Bad Online Loans.” OJK data as of March 2026; TWP90 rose from 2.77% to 4.52%.

Kumparan (May 2026). “OJK Reveals Millennials and Gen Z Have the Highest Online Loan Delinquencies.” OJK data as of March 2026: total outstanding loans reached Rp101.03 trillion, with borrowers aged 19–34 accounting for 48.65% of bad loans.

Times Malang (December 2025). “Behind the Paylater Boom, OJK Finally Regulates BNPL.” Paylater user data: 17.26 million users as of February 2025

Waspada.id (April 2026). “OJK Tightens Paylater Supervision, Warns of Debt Trap for Young Generation.” OJK data as of January 2026: banking BNPL reached Rp27.1 trillion, with 31.23 million accounts.

Kompas (May 2026). “OJK to Limit Paylater Use, Users Can No Longer Open Multiple Accounts Freely.” Paylater financing grew 55.85% YoY as of March 2026 to Rp12.81 trillion.

Bankartos.co.id (March 2026). “Indonesia’s Paylater Regulations Based on POJK and the Latest 2026 OJK Policies.” Covers POJK 11/2024 and the BNPL interest rate reduction roadmap.

Duniakreasi.id (December 2025). “Indonesia’s Gen Z Unemployment Reaches 17% in 2025: Challenges and Solutions.” Data source: Apindo.

Khazanahriau.com (January 2026). “Consumptive Behavior Among Gen Z in Indonesia: Low Financial Literacy.” OJK data: 62% of Gen Z income may potentially be spent on lifestyle expenses.

Kompasiana (August 2025). “The Doom Spending Phenomenon: When Spending Money Becomes Gen Z’s Escape from Uncertainty.” Analysis of external and psychological factors behind doom spending.