EY Indonesia and Banking Executives Discuss Digital Banking at the Retail Banking Asia Summit Indonesia 2023

• EY Indonesia joins a panel discussion on “Riding Indonesia's digital banking momentum”

• The panel addresses winning strategy for the country’s banking sector with its complex challenges and opportunities

• Customers in Indonesian still rely on cash and expect banks to have a physical location, despite the rise of digital options

JAKARTA, 23 May 2023. EY Indonesia participated in the Retail Banking Asia Summit Indonesia 2023 on 17 May 2023, held in Jakarta. Attended by leaders from the banking industry and financial technology, digital disruptors, and tech innovators, this annual program is a platform for them to share insights and discuss trending topics such as artificial intelligence (AI), machine learning (ML), deep learning, cognitive computing, natural language processing (NLP), digital assets and many more.

Evan Wiradharma, EY Indonesia Consulting Partner served as a moderator in the panel session on “Riding Indonesia's digital banking momentum” – discussing the retail banking trends, challenges, and opportunities that businesses should consider in order to thrive in this digitally disrupted world. 

Evan says: 

“The customer is changing faster than ever and banks that do not change would miss the momentum and be at risk when their customers see other options as their financial services provider. However, this disruptive time could provide opportunities for banks to create deeper and more profitable relationships with the customers they serve. With the right technology platform in place, data-savvy banks can measure the success of their value proposition and improve profitability.”

Joining the session were the leaders from the banking industry and financial technology including Sonny Supriyadi, SVP – Head of Pricing and Data Analytics at Maybank Indonesia, Firdila Sari, Digital Banking Director at Bank Aladin, Yoanna Darwin, Director – Country Head of Trade and Treasury Services at Citi Indonesia, Husni Fuad, Country Manager at Brankas, and David Brady, SEA Sales Director at Mambu. 

Sought After Digital Strategy with Banking’s Complex Challenges and Opportunities

The discussion mentioned that the current state of Indonesia's digital infrastructure, the lack of customer trust caused by the rise of recent fraud cases, and the rate of financial literacy are some of the significant factors preventing the industry from completely flourishing in the digital aspect. According to the World Economic Forum, Indonesia has the world’s third-largest unbanked population and a low financial literacy index of 40%. These two issues are strongly linked. Research in Indonesia shows that the higher a person’s financial literacy, the higher their financial inclusion.

Opportunities and challenges are plenty for Indonesian financial institutions as a result of digital disruption. With the seemingly increased consumer and investor expectations, banks are advised to address their financial performance as they reconfigure and optimize operational and business models to produce sustainable returns. Even though the risks and regulatory protection remain a primary focus, future growth will depend heavily on innovation and business-led transformation.

Based on an EY insight article discussing Indonesia’s booming financial services sector titled “Riding the wave of Indonesia’s financial services growth”, there are strategic elements that need to be taken into account as companies aim to win the market: 

1. Trust 

Trust in primary financial relationship (PFR) is primarily by personal relationship attributes such as personal relationship factors, product, trustworthiness, and control. Strong privacy policies and features are also a top priority influencing Indonesian respondents’ purchase decisions by a significant margin, according to EY 2021 Nextwave Global Consumer Banking Survey.

2. Innovation 

Indonesians are highly interested in super applications (also called super apps) that can deliver seamless integration of all their financial services. Increased customer interaction, expanded business audience reach, improved data collection, higher security, and lower operating costs are just some of the advantages that super apps serve to banks.

3. Personalization

There are much of improvements that can be made on how banks create personalized experiences for their customers. By enabling technology, banks will be flexible to cater to the market quickly and scale up at a speed. 

4. Scale 

Digitalization, technology platforms, and mobile access will be key for hoping to capture Indonesia’s millions of customers and grow at scale. Data is vital to leveraging digital offerings to the right customers. The data-driven strategy will help digital banking in sustaining its businesses and ahead of the competition. 

5. Ecosystem 

To deepen customer relationships, banks should look to ecosystem business models that will allow them to seek out customers through multiple pathways and play to their strategic strengths. Partnering with other financial services providers or high-tech companies to expand the range of products and services to better meet customer’s combined financial and lifestyle needs, would be one of the many ways to improve customer’s trust value. 

Cash is King, Despite the Rise of Digital Options

Due to the country's archipelago landscape, developing vital infrastructure and network is challenging, therefore, cash and digital payments will exist side by side. Digital may appear to be more convenient, secure, or affordable, however, the concept of “cash is king” remains applicable as many SMEs still rely on cash usage in their operations. While many still see hard cash as a preferred payment method, businesses need to start looking at going contactless and digital payment methods in their markets and distribution channels.

Evan further concludes: 

“Banks will need to set their trajectory by deciding what kind of role they intend to play in their ecosystem to drive sustainable growth and shape their future. How can they leverage their ecosystem with the role they will play to accelerate innovation, speed to market, and be able to provide integrated and end-to-end products and services to their customer? What current or future consumer problems do they intend to solve? Finding the right answers to these questions will put banks in a strong position to compete in Indonesia's dynamic and fast-paced financial services market”. 

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