Indonesian banks must prioritize digitalisation, boost financial inclusion — experts
Banking leaders at Asian Business & Finance’s Jakarta forum push digital technology and innovation to create seamless and personalised services.
The business of banking in Indonesia is on an exciting path of adopting the latest technology to create seamless and personalised services for customers, prime movers of the sector revealed at the Asian Banking & Finance Forum staged recently at the Pullman Hotel Jakarta.
Opening the forum was Dr. Silvio Struebi, partner at Simon-Kucher and head of banking for Asia Pacific, who presented his talk, titled “Drive Digital Sales and Marketing Efficiency.”
A revenue and commercial strategy expert, he anchored his presentation on several commercial strategies that can be carried out by banks to achieve better growth for the customers. In this list are product and value proposition, monetisation strategy, sales and go-to market, and digital marketing.
But he highlighted the importance of behavioural economics — a discipline in psychology the analyzes the decision-making processes of customers. For instance, one may decide to make products that are simpler for customers or push fewer choices than too many, because complexity is an obstacle to sales, especially in online channels.
How to stay relevant
The forum also brought to the stage Yoanna Darwin, country head for treasury and trade solutions of Citi Indonesia, to discuss how banks could stay relevant in the rapidly changing financial landscape.
Yoanna focused on key innovations shaping the future of finance such as fintech, big data, AI, blockchain and tokenization of real-world assets or RWA.
At present, banks are reaching “bank 5.0,” which she described as a state of operations involving the use of AI and blockchain technology. Many banks in Indonesia, though, are still at the “bank 3.0” stage, where they still struggle with mobile banking, she said.
Despite the current challenges faced by many banks in Indonesia, such as their slow progress towards adopting mobile banking technology, there are good prospects for the adoption of digital payments in the country. For example, there has been a significant increase in the use of Quick Response Code Indonesian Standard (QRIS) or the “QR code” and the number of fintech players has increased by 92% from 2016 to 2022.
To stay relevant, she suggested that banks need to execute a digital strategy that includes five key elements:
1. Know your position and determine strategic priorities;
2. Establish a culture and mindset that supports digital transformation;
3. Understand your strengths, business model, and targets;
4. Secure senior buy-in and create policies and guidance; and
5. Work with fintech companies and invest in talent development, both in terms of improving soft skills and hard skills.
By following these strategies, banks in Indonesia would not only stay relevant but also work with fintech companies that empower them and even potentially allow them to operate as a bank or fintech themselves in the future.
The point of digitalisation
Meanwhile, Banjaran Surya Indrastomo, chief economist of Bank Syariah Indonesia (BSI), used his time on the Asian Banking & Finance Forum stage to impress upon the industry that digitalisation is important to strengthen financial inclusion.
The whole point of digitalisation for Indonesian banks, he said, is to help overcome the cost and physical barriers, offer the opportunity to rapidly scale up to financial services, and promote women’s economic empowerment by facilitating greater account ownership and asset accumulation.
Banjaran’s view is supported by research conducted by BSI and the University of Indonesia, which indicates an increasing number of digital savings account ownership in both conventional and Islamic banks in post-pandemic Indonesia.
He said this underscores the importance of Indonesian banks adapting to changing consumer behaviour and economic conditions, while prioritizing easy, accessible, and simplified transactions.
He emphasized the need for Islamic banks to accelerate their digital transformation efforts and stay relevant to customers’ changing needs.
Seamless and personalised services
Bringing out the first panel of banking experts at the Jakarta forum, Tushar Agarwal, who is managing director and partner at Boston Consulting Group and moderator of the session, also introduced the theme, “Digital Banking and Customer Experience: Delivering Seamless and Personalised Services.”
Tackling the issue were Rudy Hamdani, head of digital banking solutions at Bank OCBC NISP; Andreas Kurniawan, chief digital officer at Bank Danamon; Lusiana Saleh, head of digital banking at CIMB Niaga; and Indra Gunawan, head of wholesale solutions at Bank Negara Indonesia.
Indra said that knowing customer needs is the key to providing the best experience for them. “For wholesale banking, the main (concern) behind the transaction is still personalized. What we did is listen to what customers want and improve capabilities, features, (and) customer experience as well as security, so that customer transactions are secured and also in real-time delivery," he said.
Meanwhile, Andreas said Bank Danamon focuses on building connectivity within the ecosystem where they also try to adopt the latest technology such as AI and Open Banking to create seamless connectivity for customers where they can choose banking activities from whatever channel they prefer.
In keeping with the theme, Rudy Hamdani explained how Bank OCBC NISP prioritizes customer experience by providing easy services, such as allowing customers to make transactions abroad that are directly debited from their country's currency account. He said there are 11 foreign currency accounts that can be used by customers plus rupiah.
From her end, Lusiana said CIMB Niaga has real time data processing that can determine the problem specifications or needs of each customer. “We do segmentation to customers so we can know what they need,” she said.
She said they offer investment instruments to customers interested in investing and cited as an example suggesting mutual bonds to those who like to buy coffee every week, giving them the option of choosing cheap coffee that is close to their location.
Stoking much interest at the Asian Banking & Finance Forum was the presentation of Raymond Setiawan, YCP Solidiance manager, on neo banking and how it operates entirely online, without any physical branch locations, whilst offering attractive interest rates and the use of artificial intelligence.
He said neo or digital banks are seen as a potential solution to penetrate unbanked populations — still at 51% — in areas where there are geographical and affordability constraints. Neo banks may also offeR low administrative fees, low transfer fees, and customized saving plan which can make them more appealing to unbanked or underbanked individuals.
In 2021, around 25% of adults in Indonesia have a digital bank account and its users are predicted to grow upward to 39% in 2026. This growth of neo banking is predicted to be significant, with a 59% compound annual growth rate projected for 2027.
At the Jakarta forum’s closing session, Tim Charlton, the esteemed publisher of Asian Business & Finance, led an engaging discussion with two renowned banking experts on a topic that is highly valuable in today’s dynamic economic environment — “Wealth Banking: Managing Assets in a Dynamic Economic Environment.”
Joining the panel were two distinguished experts, Rudy Tandjung, the director of consumer Banking at DBS Indonesia, and Josua Pardede, the chief economist at PermataBank.
Josua said that during and after the COVID-19 pandemic, the situation on the financial market changed dynamically where customers were not only looking for higher yields in investing but also for sustainability in investing so that ESG (Environmental, Social, and Governance) became a concern to pay attention to.
Meanwhile, Rudy said that from a wealth management perspective, investment in each of these fields is very important for Indonesia.
“People are still looking for better returns but with manageable risks. If you look at it from a market point of view, in the last three years, the growth of individual investors has tripled, the total percentage of depositors has also increased by double digits, in terms of the rupiah has increased by 15%-16%, and what is interesting in terms of growth in the rupiah come from the richest people, so we (DBS Bank) are trying to capture this," he said.
Charlton geared the discussion to shedding light on this exciting trend that is shaping the future of banking and investments. It is clear that the market is evolving, and those who invest with the ESG aspect in mind are likely to reap significant rewards in the years to come.