After a gap of nearly two years, I visited Jakarta for a second time in March 2017. The purpose of my trip was to attend the Misys Indonesia Banking Outlook event, and share my thoughts on the digitalisation of the country’s financial sector. Upon exiting the airport, I was immediately aware of the degree of change which has taken place in the intervening period. Not the traffic though. That was as slow as ever. The fourth most populous country in the world, Jakarta’s road network is heavily congested, with a variety of vehicles conveying citizens and goods from A to B. Consequently, car journeys to anywhere take an inordinately long time, which affords a restlessly curious traveller with an ideal opportunity to gaze out of the window and absorb the sights of a sprawling city with nearly 10 million inhabitants. While my memory bank may benefit, the opposite is true of the Indonesian economy: officials estimate that Jakarta’s traffic jams cause economic losses of approximately $3bn per annum. Ouch, that’s not a pretty picture.
A few things struck me during the 22 mile trip (35km) conducted at glacial pace. Anyone who’s spent time in Asia will be familiar with the small capacity motorcycle as a preferred mode of transport. At the last count, Indonesia had 77,755,658 registered two-wheelers. That figure dates from 2013, and will likely have increased modestly between then and now, as quarterly bike sales have been in decline. As per usual, Jakarta’s motorcyclists were out in force while I was en route to my hotel, swarming on either side of the car and weaving through gaps which scarcely seemed to exist. Apart from the ‘oh-my-god-they’re-going-to-have-an-accident-any-second’ riding, what really stood out were the green jackets – and matching crash helmets – which almost every other rider (and frequently their passengers) was wearing. Now, it’s entirely possible that I may have been inattentive on my previous visit, but I couldn’t recall seeing such a proliferation of emerald outside of Eire (and Boston). I’ll also happily confess to being ignorant to the name and logo on display, but clearly GO-JEK represented something significant, given its widespread penetration.
After a bit of judicious Googling from the comfort of the backseat, my ignorance gave way to enlightenment. In GO-JEK, I was seeing first-hand the very visible manifestation of Indonesia’s transitional steps towards being an increasingly digitalised economy. The emergence of GO-JEK as commercial force is worth highlighting, as it shows how the power of an app is able to spark sectoral transformation. In brief, GO-JEK is a hyperlocal transport, logistics and payments start-up, and the first Indonesian company to be awarded the tag as a unicorn. The reason why I found myself in the midst of a sea of green is due to the company having recruited a fleet in excess of 200,000 representatives since its formation in October 2010. From humble beginnings – GO-JEK began with just 20 riders – acceleration has been swift. This began with the release of its Android and iOS app at the beginning of 2015: the company has been heading on an upward trajectory ever since, diversifying its activities into 15 different services. It’s not just about transportation either: users can request groceries be delivered, their properties get cleaned, and their aching muscles become soothed by a relaxing massage.
The parallels to Uber are obvious, in that it’s about being a provider of lifestyle services, and not just transportation. Indeed, Uber is also present in Indonesia, and its logo can also be seen on the apparel worn by taxi motorcyclists. In a sign that competition is alive and well, it’s not just GO-JEK versus Uber in a battle for supremacy: other providers – Grab, for example – are seeking a slice of the market too by both organic and inorganic means. While writing this piece, the announcement of Grab’s purchase of Kudo, a payment provider, hit my inbox. But it’s GO-JEK that’s seized the initiative, and has seemingly out-Ubered Uber and reached beyond Grab. As the company presses forward, presumably on the way to an IPO which will deliver healthy returns to financial backers, it will need to remain vigilant over the integrity of customer data, having already attracted some unwanted headlines over the security of the GO-JEK app.
Despite the existence of GO-JEK, Indonesia’s digitalisation as a whole is at a nascent stage. A report from McKinsey, published in October 2016, succinctly describes the country as “a curious paradox. Its digital denizens are among the world’s most active, and it has a vibrant start-up ecosystem, but overall the country lags in embracing the benefits of modern technology. ICT infrastructure is weak and digital use is uneven within and among various business sectors. Indonesia’s connected citizens are tech-savvy, but internet penetration is low. In short, Indonesia has a long way to go in the digital age.” Well, they say the only way is up, and encouragingly Indonesia is a country of opportunity rather than constraint. McKinsey 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 which 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.
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. Accelerating the onboarding 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. TWO MONTHS?! That’s nothing short of woeful. 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 onboarding, 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 AML/CFT controls are made by digital advancements: advanced analytics for instance. Having successfully been removed from list of countries monitored by the 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.
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, BTPN’s 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. 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 for 2016, the closer integration of physical and digital channels bring significant benefit to customers and institutions alike. Jenius is living proof.
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.
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. I hope to revisit Indonesia again in the next 18 months to discover where the country has reached in its transition to digitalised economy. If recent history is a reliable indicator, the progress will be both palpable and substantial. ‘Semoga berhasil’ (good luck) to all involved.