In a recent interaction with Industry Outlook, Vishal Tulsian, President Director at PT Bank Amar Indonesia Tbk shared his views on the impact the recent advancements in fintech have had on the banking sector, the future digital banking trends in Indonesian digital banking, and more.
Vishal is a recognized FinTech industry expert, a respected digital banking authority, and the driving force behind many revolutionary industry initiatives. As a qualified Chartered Accountant, he has also completed the prestigious Harvard Business School Executive Management Program, earned a Master's degree in the UK.
How is the Indonesian digital banking industry contributing towards financial inclusion and MSME support?
Known as the primary engines of economic growth, MSMEs comprise 99 percent of existing business enterprises in Indonesia and employ over 95 percent of the total workforce across the country. While MSMEs contribute over 60 percent to Indonesia’s GDP, the latest survey by Bank Indonesia in the MSME Empowerment Report 2022 indicates that only 30.5 percent of them have received loans. The Indonesian digital banking industry plays a pivotal role in advancing financial inclusion and supporting the growth of MSMEs. By leveraging technology, offering innovative financial solutions, and collaborating with various stakeholders, digital banks are helping bridge the financial inclusion gap and contributing to the economic development of Indonesia. However, financial inclusion is not just about providing access to banking services; it is also about ensuring that individuals and MSMEs have the financial literacy to make informed decisions.
Throw some light on the challenges and opportunities for digital banking in Indonesia.
The challenge for the Indonesian digital banking industry lies in the necessity of adapting to rapidly evolving technological developments and ever-changing customer needs. With technology advancing at an unprecedented pace, banks must remain current with the latest trends while also ensuring the safety and reliability of their systems. Moreover, swiftly comprehending and responding to changes in customer preferences and expectations is a vital factor in delivering a relevant banking experience in this digital era. However, a large segment of Indonesia’s population still lacks access to basic banking services, making them ‘unbanked’. While Indonesian digital banking encounters numerous challenges, it also offers a promising landscape of opportunities through a digital technology approach. By addressing regulatory obstacles, bolstering security measures, and expanding efforts to promote financial inclusion, the industry can unlock its full potential and bring transformative change to Indonesia's banking sector.
Share your thoughts on the importance of banks enhancing their customer experience while ensuring data safety in recent times.
In an era where the threat of financial crime is increasingly rampant, we all need to be vigilant against the risk of falling victim to unexpected financial losses. According to research conducted by Bank Indonesia on Financial Crimes in Digital Payments, the value of digital banking transactions in 2022 grew by 28.72 percent compared to the previous year, which underscores the rapid transformation of digital access to financial services in the country. However, this convenience also exposes vulnerabilities to criminal activities within the banking sector. A study conducted by the Center for Digital Society (CfDS) at Gadjah Mada University in 2022 found that 66.6% of respondents had fallen victim to digital fraud.
Hence, the current state of the banking industry finds itself at the forefront of addressing the challenges posed by financial crimes. One of the greatest challenges lies in providing maximum security without compromising customer convenience. Digital banks employ a multifaceted approach to enhance their digital presence and customer experience while prioritizing customer safety in the face of financial crimes. By combining advanced technology, vigilant monitoring, education, and innovative solutions, banks can strive to create a secure and user-friendly banking environment for their customers.
Briefly explain how digital banking can leverage technology to enhance product development.
Digital banking has transformed the financial landscape by harnessing technology to create innovative and customer-centric products. This revolution is driven by the seamless integration of various technological advancements, enabling financial institutions to deliver enhanced services and products to their customers. Digital banking utilizes technology to elevate the product development process, incorporating big data and analytics, as well as AI and ML. These two technologies assist in the development of tailored financial solutions for individual customers, providing personalized experiences while also enabling digital banks to automate processes, make data-driven decisions, and assess credit risks more accurately.
What impact did the recent advancements in fintech have on the banking sector?
Citing data from the Financial Services Authority (OJK), the disbursement of fintech lending loans reached Rp. 23.07 trillion in March 2022, representing a significant increase of 40.64 percent compared to the previous month’s total of Rp. 16.41 trillion. Furthermore, this figure marked an impressive 96.08 percent growth compared to the same period the previous year, which stood at Rp. 11.77 trillion in March 2021. This data shows that the financial technology sector in Indonesia is on the rise, and people are starting to use it intensively. The rapid growth of fintech has reshaped the financial services industry as well, prompting banks to adapt and innovate in response to the changing landscape. Banks have recognized that partnering or collaborating with fintech companies can be a strategic move to provide better services to their customers.
What are the future digital banking trends in Indonesian digital banking, and how are banks preparing a strategy for potential disruptions, such as inflation or geopolitics?
The future of digital banking is poised for significant growth, driven by ongoing technological advancements. These innovations are grounded in our core philosophy that technology should not only impact but also improve lives. In considering the impact of inflation and geopolitics, it becomes evident that the top of the socioeconomic pyramid is likely to be more affected than the bottom. Our target segment, characterized by underserved individuals, faces unique challenges that are less influenced by factors like inflation. While they may experience some increases in the cost of living, their primary concerns often revolve around basic needs, such as housing repairs.