Alex Kwiatkowski, Senior Strategist, Banking and Digital Channels at Finastra takes a look at the progress Indonesia’s retail banks have made in comparison to their corporate counterparts.

Indonesia’s digitalisation as a whole is at a nascent stage. A report from McKinsey, published in October 2016, forecasts that embracing digital will deliver a $150bn boost to the economy – equal to 10 per cent of GDP – by 2025, with productivity having been boosted across all sectors.

Which brings us neatly to the banking industry, and the steps institutions need to take in order to either exploit digital’s advantages further or simply get started on the road to transformation. When the market is scrutinised, there’s a discernible difference in the progress that retail banks have made in comparison to their corporate counterparts. Let’s take the laggard first.

Paper Still Dominates

The digitalisation of corporate banking in Indonesia has barely begun. Paper-based processes dominate, and while there’s nothing particularly unusual in this, efforts need to be made to shift from an analogue world to a digital one.

«Indonesia is operating with one arm tied behind its back.»

Accelerating the on-boarding process, for example, is a good area to focus upon. On average, it takes approximately two months to obtain corporate bank approval, account numbers and online access in Indonesia.

Handbrake On

A healthy, vibrant economy is enabled and embodied by a thriving corporate sector. Right now, Indonesia’s is operating with one arm tied behind its back. This needs to, and can, change, through the implementation of appropriate technological solutions and supporting workflows.

Along with on-boarding, the customer support function is most definitely an operational area which also needs to be overhauled to deliver improved end-user experiences.

Creating a service-focused culture within corporate banking is an intrinsic element in the country’s accelerated economic expansion, and will act as an attraction to the foreign direct investment which the government is seeking. And further essential improvements in Anti Money Laundering/Controls in Trade Finance (AML/CFT) controls are made by digital advancements: advanced analytics for instance.

Change in Consumer Behaviour

Having successfully been removed from list of countries monitored by the Financial Action Task Force (FATF) for perceived AML/CFT weaknesses, Indonesia needs to explicitly demonstrate that it’s continuing to deal adequately with this critically important piece of the compliance puzzle.

«This change in user behaviour is something which banks have to respond to.»

The digitalisation of retail banking is at a further stage of progress, having been heavily influenced by the demand placed upon it by customers.

According to Peterjan Van Nieuwenhuizen, PT Bank Tabungan Pensiunan Nasional's (BTPN) Head of Digital Banking, digitalisation is «largely driven by customer pull. Banks to a large extent have been pulled into this (digital) because people are using the mobile phone for everything from transport to booking their travel to chatting.»

This change in user behaviour is something which banks have to respond to, or risk becoming irrelevant at best and obsolete at worst.

Smartphone Power

BTPN’s response has been to create new propositions which harness the power of the smartphone, allowing users to have a rich experience to ‘manage life and finances in a simpler, smarter, and safer way’. Using Misys technology, BTPN’s Jenius gives customers access to a range of digitalised services, starting with account opening via mobile and continuing into all the other aspects required to transact and interact in the modern financial world.

Jenius is most definitely a giant step in a new direction for Indonesia’s banking sector. It’s also notable to see that BTPN have created a physical extension of the Jenius app. This is in the form of the ‘Mobius Hub’, a pop-up concept which serves as a tactical marketing tool for acquisition, awareness, education, and sector disruption.

As I wrote in my retail banking predictions, the closer integration of physical and digital channels bring significant benefit to customers and institutions alike. Jenius is living proof.

Financial Inclusion

There’s still much to be done in the digitalisation of retail banking, not least as part of the drive to improve financial inclusiveness. Indonesia’s government has set an inclusion target of 75 per cent by 2019: to achieve this will require a seven point increase from the latest position revealed by industry regulator OJK in January 2017. This is ambitious, but advancements in technologies – most obviously in the sphere of mobile banking – make the goal achievable.

«A digital first strategy is paying dividends for disruptive players.»

Indonesia, as I saw with my own two eyes, is changing – seemingly for the better – year on year. A digital first strategy is paying dividends for disruptive players like GO-JEK and Grab. And while banks have to abide by tighter regulatory supervision, the development of Jenius shows that innovation is not an impossible dream.

What’s required now is more of the same in retail banking, along with a concerted effort to kick-start activities in the digitalisation of corporate banking.

Alex Kwiatkowski, is Senior Strategist, Banking & Digital Channels at Finastra.