Bank Digital 101: Ecosystem and Future Prospect

In the last three years, the Indonesian banking industry has been stirred with the rise of digital banks, both in the form of new banks and conversions from existing banks. As a first step, the Government released a new regulation that is expected to accommodate the needs of digital bank players through the Financial Services Authority (OJK).

POJK Number 12/POJK.03/2021 contains various provisions related to the establishment of banks and capital. Among those are the provisions for the establishment of two types of digital banks. First, the establishment of a new bank as a digital bank and second, the transformation of existing commercial banks into digital banks

In addition, the new rules are also to provide clear boundaries regarding the digital banking business considering that this trend is still relatively new in the Indonesian banking industry.

In its efforts, digital banks continue to provide literacy, therefore, people understand the business and services they run. It is while taking advantage of digital finance rapid acceleration during the Covid-19 pandemic. Based on the FICO survey in 2020, 54% of Indonesian consumers prefer to use digital channels to interact with banks, 3% mobile banking, 7% internet banking, and 14% through telephone banking.

However, we cannot forget the large groups of Indonesian people who are more comfortable with financial transactions by visiting ATMs or branch offices.

PT Bank Jago Tbk (IDX: ARTO) held a journalistic training to provide an in-depth understanding of digital banking. DailySocial had the opportunity to participate in the training held in Bali.

Several prominent observers participated, including the Research Director of the Center of Reform on Economics (CORE) Indonesia Piter Abdullah, the Indonesia Stock Exchange Business Development Advisor Poltak Hotradero, and the Director of the Center of Economic and Law Studies (CELIOS) Bima Yudhistira.

Digital bank perception

Many Indonesian people recognize digital banks as digital banking services. Also, considering it is still a brand-new business model, the understanding of digital banking is still considered blurry among the public.

Research Director of the Center of Reform on Economics (CORE) Indonesia Piter Abdullah mentions a definition to significantly distinguish digital and conventional banks. He said, a digital bank is defined as a bank along with its services where we no longer need to think about where the head office, branch offices, the number of ATMs, including the number of employee.

Similar to the GoPay and OVO digital wallet platforms, we have no idea where the money stored. With a decade of internet and smartphone adoption phenomenon, he considered the banking business would remain the same, but the delivery is started shifting.

In his opinion, this perception is reasonable considering that people are used to transacting at banks. Bank is identified as financial institution with branch offices and head office. Unlike the pre-digital era, banking competition is clear from the bank efforts to build an ecosystem. In the context of conventional banks, its ecosystem is branch offices and ATMs.

To date, the use of ATM started to be irrelevant. People are getting used to making financial transactions through mobile banking platforms and digital wallets. The banking industry has experienced massive adoption during the pandemic.

Based on OJK data, a total of 2,593 branch office networks were closed from 2017 to August 2021. These branch offices are closed in line with the bank’s digital transformation as seen from the increasing volume of digital transactions.

Piter said, whether conventional banks have not transformed into digital banks today, it does not mean they have failed to digitize. It’s more of a competition failure. It should be noted, the banking advantage factor has changed, things excelled in the past, could be a burden in the era of the digital ecosystem.

“This is not a sprint, but a marathon, determined by resilience. Moreover, digital banking is still a brand-new trend in Indonesia. Therefore, this is the reason for established banks to be prepared, not directly face-to-face but through proxies or subsidiary,” said Piter.

The above explanation is a reminiscent of Bank Jago’s Founder Jerry Ng hypothesis when he decided to acquire Artos Bank and change its name. Jerry considered Bank Artos have quite small legacies (branch offices, ATMs, and HR). In this case, his team can develop technology from scratch instead of taking a bank with thousands of branch offices.

Digital bank study case

Moreover, the Indonesia Stock Exchange Business Development Advisor, Poltak Hotradero highlighted the digital ecosystem as one of the key factors in digital banks. He took several examples of successful digital banks in the world that apply a similar model, for example KakaoBank from South Korea.

KakaoBank was founded in 2016 and is owned by internet giant Kakao Corp. In its early days, KakaoBank recorded extraordinary achievements. Within five days, KakaoBank reached 1 million users.

KakaoBank also recorded financial performance above the industry average. For example, deposit growth was at 13.65% from the industry average at 11.98%. Also, KakaoBank’s NPL was at 0.26% where the industry reached 1.78%. Meanwhile, income fee reached 30.16% of the industry’s 28.02%.

Sumber: Boston Consulting Group — Source: Boston Consulting Group

For Poltak, KakaoBank’s success also influenced by the large digital ecosystem owned by its parent company. Kakao has a diverse service portfolios, such as chat services, fintech, e-commerce, and games.

“The internet evolution has brought changes in people and money. Machines are integrated with each other thanks to the internet. This is the foundation for the development of digital banks where payments, liquidity, and analytics will be in the cloud. In other words, technology enables banks [digital] to be able to scale up faster,” he said.

In the future, Poltak mentioned the competition of three types of banks, conventional banks, digital banks, and embedded banks. He defines embedded bank (Bank-as-a-Service/BaaS) as a service that has been operating digitally since day one and has entered the (native) ecosystem. He also said that embedded banks would become part of the plumbing system for corporate or individual financial services.

“Digital platforms will facilitate synergies with other digital financial services, such as investment and insurance services. However, it is important to note that the biggest cost and risk of the digital transition is failure to maintain market share and segments. These factors can turn banks irrelevant,” he added.

Therefore, he highlighted that digitalization is a competitive necessity. We should not let the financial sector only delegate its role through banks, given the huge business potential and services. He believes market expansion is important for developing digital banks considering a large number of unexplored market segments in Indonesia and can only be served through digital.

Digital bank projection

According to his study, Director Center of Economic and Law Studies (CELIOS) Bhima Yudhistira divides digital banks into three models, direct banks, neobanks, and challenger banks.

He explained that direct banks enlarge opportunities for banking services, such as savings and digital loan channeling. Furthermore, neobank operates as a fully digital bank, without branch offices, but with a mobile application. Meanwhile, challenger banks are said to be revolutionizing the way transactions, new loan models, and personal finance.

Bhima said the global potential accumulation of challenger bank and neobank markets could reach $578 billion in 2027, according to a Medici Research report.

We try to take other sources to provide a thorough definition, especially on neobanks and challenger banks. Citing from FinTech Magazine, neobank offers flexibility to various services, including payroll and expense management. In addition, neobank also offers corporate financial solutions to address the challenges of MSMEs.

The API presence helps to integrate business flows with banking requirements. However, neobanks do not have a banking license as they operate by relying on partner banks. Therefore, they cannot offer traditional banking services.

Meanwhile, challenger banks use technology to streamline the banking process. However, challenger banks also maintain a physical presence to operate fintech services. The challenger banks scope is generally much smaller than the mainstream banking sector. It is estimated that there are currently 100 challenger banks globally.

Director Center of Economic and Law Studies (CELIOS) Bima Yudhistira / Bank Jago

Unlike neobank, challenger bank has a bank license and can offer customers a wide range of traditional and digital banking services. These traditional banking services can be accessed and utilized more accommodatively than commercial banks.

Furthermore, Bhima considered that digital banks offer a number of advantages, both for individuals and business players. At the individual level, digital banks increase customer literacy in other financial products, such as investments. According to World Bank data in 2020, the share of stock market capitalization to GDP is still relatively small. The emergence of digital banks is projected to encourage investment interest.

In addition, digital banks can encourage financial control efforts in the MSME sector with financial transparency and efficiency. Moreover, business players can get access to financing channeled by digital banks through channeling schemes.

The evolution of neobank / Sumber: PwC — Neobank evolution . Source: PwC

“To date, banks do not compete with technology, but with high interest rates. Moreover, digital bank suddenly appeared, offering easy services and access to capital. Currently, Indonesia has 65 million MSMEs and some of them are yet to receive loans. Digital banks can add to that financing capacity. If Indonesia wants to restore the economy to the level of 5%, its credit growth must triple,” he explained.

Based on data-driven credit scoring, digital banks can continue to grow by extending credit to unbankable segments. In the future, this loan disbursement can use the customer transaction rating indicator on e-commerce, food delivery, or ride-hailing platforms.

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Original article is in Indonesian, translated by Kristin Siagian

Belajar Bank Digital, Ekosistem, dan Prospek di Masa Depan

Dalam tiga tahun terakhir, industri perbankan Indonesia diramaikan dengan geliat pendirian bank digital, baik berbentuk bank baru maupun konversi dari bank yang sudah ada (existing). Sebagai langkah awal, Pemerintah melalui Otoritas Jasa Keuangan (OJK) merilis aturan baru yang diharapkan dapat mengakomodasi kebutuhan pelaku-pelaku bank digital.

POJK Nomor 12/POJK.03/2021 memuat berbagai ketentuan terkait pendirian bank dan modal. Di antaranya adalah ketentuan pendirian dua jenis bank digital. Pertama, pendirian bank baru sebagai bank digital dan kedua, transformasi bank existing umum menjadi bank digital

Di samping itu, aturan baru juga untuk memberikan batasan yang jelas terkait bisnis bank digital mengingat tren ini masih terbilang baru di industri perbankan Indonesia.

Dalam upayanya, bank digital terus melakukan literasi agar masyarakat memahami bisnis dan layanan yang mereka jalankan. Ini sembari memanfatkan momentum akselerasi keuangan digital yang pesat saat pandemi Covid-19. Berdasarkan survei FICO di 2020, 54% konsumen Indonesia lebih suka memakai kanal digital untuk berinteraksi dengan bank, 3% mobile banking, 7% internet banking, dan 14% lewat telepon banking.

Namun, kita tidak bisa melupakan bahwa masih besar kelompok masyarakat di Indonesia yang lebih nyaman bertransaksi keuangan dengan mendatangi ATM maupun ke kantor cabang bank.

PT Bank Jago Tbk (IDX: ARTO) menggelar pelatihan jurnalistik demi memberikan pemahaman mendalam perihal bank digital. DailySocial berkesempatan mengikuti pelatihan yang digelar di Bali ini.

Beberapa pengamat terkemuka turut berpartisipasi, antara lain Direktur Riset Center of Reform on Economics (CORE) Indonesia Piter Abdullah, Advisor Pengembangan Bisnis Bursa Efek Indonesia Poltak Hotradero, dan Director Center of Economic and Law Studies (CELIOS) Bima Yudhistira.

Persepsi bank digital

Tak sedikit masyarakat di Indonesia yang mengenali bank digital sebagai layanan digital banking. Lagi-lagi mengingat model bisnisnya masih baru, pemahaman terhadap bank digital pun dinilai masih kabur di kalangan masyarakat.

Direktur Riset Center of Reform on Economics (CORE) Indonesia Piter Abdullah memberikan satu definisi yang sekiranya mampu membedakan bank digital dan bank konvensional secara signifikan. Menurutnya, bank digital didefinisikan sebagai bank beserta layanan yang mana kita tidak perlu lagi memikirkan di mana kantor pusat, kantor cabang, jumlah ATM, termasuk jumlah orang yang mengoperasikan.

Sama seperti platform dompet digital GoPay dan OVO, kita tak perlu tahu di mana uangnya disimpan. Dengan fenomena adopsi internet dan smartphone selama satu dekade ini, ia menilai bahwa bisnis bank akan tetap sama, tetapi delivery-nya saja yang kini mulai berbeda.

Menurutnya, persepsi ini wajar mengingat masyarakat terbiasa bertransaksi di bank. Bank diidentikkan sebagai lembaga keuangan dengan kantor cabang dan kantor pusat. Berbeda dengan era sebelum digital, persaingan perbankan dapat terlihat dari upaya bank membangun ekosistem. Dalam konteks bank konvensional, ekosistem mereka adalah kantor cabang dan ATM.

Kini perlahan-lahan keberadaan mesin ATM mulai tidak relevan. Orang-orang mulai terbiasa bertransaksi keuangan melalui platform mobile banking maupun dompet digital. Adopsi besar-besaran ini dinikmati industri perbankan selama masa pandemi.

Berdasarkan data OJK, sebanyak 2.593 jaringan kantor cabang ditutup dari 2017 hingga Agustus 2021. Penutupan kantor cabang ini selaras dengan transformasi digital bank yang terlihat dari meningkatnya volume transaksi secara digital.

Menurut Piter, di situasi sekarang apabila bank konvensional belum bertransormasi ke arah bank digital, tidak berarti mereka gagal melakukan digitalisasi. Ini lebih kepada kegagalan kompetisi. Perlu dicatat, faktor keunggulan perbankan sudah berubah, yang unggul di masa lalu, bisa jadi beban di era ekosistem digital.

“Ini bukan lomba lari cepat, tetapi maraton, ketahanan yang menentukan. Lagipula, bank digital masih jadi tren baru di Indonesia. Makanya, ini alasan bank-bank yang sudah mapan mempersiapkan diri, tapi tidak langsung face-to-face melainkan lewat proxy atau anak usahanya,” papar Piter.

Paparan di atas sedikit mengingatkan pada hipotesis Pendiri Bank Jago Jerry Ng ketika memutuskan mencaplok Bank Artos dan mengganti namanya. Jerry menilai Bank Artos tidak memiliki banyak legacy (kantor cabang, ATM, dan SDM). Dengan kondisi ini, pihaknya dapat leluasa mengembangkan teknologi dari awal ketimbang mengambil bank yang sudah punya ribuan kantor cabang.

Studi kasus bank digital

Pada paparan berikutnya, Advisor Pengembangan Bisnis Bursa Efek Indonesia Poltak Hotradero menyoroti ekosistem digital sebagai salah satu faktor kunci pada bank digital. Ia mengambil beberapa contoh bank digital sukses di dunia yang menerapkan model serupa, misalnya KakaoBank asal Korea Selatan.

KakaoBank berdiri di 2016 dan dimiliki oleh perusahaan raksasa internet Kakao Corp. Pada awal kemunculannya, KakaoBank mencatatkan pencapaian yang luar biasa. Dalam lima hari, KakaoBank mengantongi 1 juta pengguna.

KakaoBank juga mencatat kinerja keuangan di atas rata-rata industri. Misalnya, pertumbuhan deposit sebesar 13,65% dari rerata industri 11,98%. Kemudian, NPL KakaoBank juga sebesar 0,26% di mana industri mencapai 1,78%. Sementara, pendapatan fee mencapai 30,16% dari industri 28,02%.

Menurut Poltak, keberhasilan KakaoBank tak lepas dari ekosistem digital besar yang dimiliki perusahaan induknya. Kakao memiliki portofolio layanan beragam, seperti layanan chat, fintech, e-commerce, dan game.

“Evolusi internet membawa dampak perubahan pada manusia dan uang. Mesin-mesin juga saling berinteraksi berkat internet. Ini menjadi pondasi perkembangan bank digital di mana nantinya pembayaran, liquidity, dan analytics berada di awan (cloud). Dengan kata lain, teknologi memampukan bank [digital] untuk bisa scale up lebih cepat,” tuturnya.

Di masa depan, Poltak menyebutkan tiga jenis bank yang bakal berkompetisi antara lain bank konvensional, bank digital, dan embedded bank. Poltak mendefinisikan embedded bank (Bank-as-a-Service/BaaS) sebagai layanan yang sejak awal sudah beroperasi secara digital dan masuk ke ekosistem (native). Ia juga menilai embedded bank akan menjadi bagian dari plumbing system jasa keuangan korporasi atau individu.

“Platform digital akan memudahkan sinergi dengan layanan keuangan digital lainnya, misalnya layanan investasi dan asuransi. Namun perlu dicatat, biaya dan risiko terbesar dari transisi digital adalah kegagalan mempertahankan pangsa dan segmen pasar. Faktor tersebut dapat membuat bank menjadi tidak relevan,” tambahnya.

Maka itu, ia menggarisbawahi bahwa digitalisasi adalah keniscayaan kompetitif. Jangan sampai sektor keuangan hanya diserahkan perannya lewat bank saja mengingat potensi bisnis dan layanannya begitu besar. Ia meyakini perluasan pasar penting untuk mengembangkan bank digital mengingat masih ada segmen pasar yang belum tergarap di Indonesia dan hanya bisa dilayani lewat digital.

Proyeksi bank digital

Menurut studinya, Director Center of Economic and Law Studies (CELIOS) Bhima Yudhistira membagi bank digital ke dalam tiga model, yakni direct bank, neobank, dan challenger bank.

Ia memaparkan, direct bank memperbesar peluang layanan perbankan, seperti tabungan dan channeling pinjaman digital. Kemudian, neobank beroperasi sebagai bank yang full digital, tanpa kantor cabang, dan memiliki aplikasi mobile. Sementara, challenger bank dikatakan merevolusi cara transaksi, model pinjaman baru, dan personal finance.

Bhima mengungkap, potensi akumulasi pasar challenger bank dan neobank secara global dapat mencapai $578 miliar di 2027 menurut laporan Medici Research.

Kami mencoba mengambil sumber lain untuk memberikan definisi lebih dalam, terutama pada neobank dan challenger bank. Mengutip FinTech Magazine, neobank menawarkan fleksibilitas ke berbagai layanan, termasuk payroll dan expense management. Selain itu, neobank juga menawarkan solusi keuangan korporasi untuk menjawab tantangan yang dihadapi UMKM.

Kehadiran API membantu mengintegrasikan alur bisnis dengan persyaratan perbankan. Kendati begitu, neobank tidak punya lisensi perbankan karena mereka beroperasi dengan mengandalkan bank mitra. Dengan demikian, mereka tidak dapat menawarkan layanan perbankan tradisional.

Sementara challenger bank memanfaatkan teknologi untuk merampingkan proses perbankan. Namun, challenger bank juga mempertahankan kehadiran fisik untuk mengoperasikan layanan fintech. Sekop challenger bank umumnya jauh lebih kecil dibandingkan pada sektor perbankan mainstream. Diperkirakan ada 100 challenger bank secara global saat ini.

Berbeda dengan neobank, challenger bank memiliki lisensi bank dan dapat menawarkan nasabah terhadap berbagai macam layanan perbankan tradisional dan digital. Layanan perbankan tradisional ini juga dapat diakses dan dimanfaatkan lebih akomodatif dibandingkan bank umum.

Lebih lanjut, Bhima menilai bahwa bank digital menawarkan sejumlah keunggulan, baik untuk individu maupun pelaku usaha. Di level individu, bank digital meningkatkan literasi nasabah terhadap produk keuangan lainnya, misalnya investasi. Menurut data World Bank di 2020, porsi kapitalisasi pasar saham terhadap PDB masih relatif kecil. Kemunculan bank digital diproyeksi dapat mendorong minat investasi.

Selain itu, bank digital dapat mendorong upaya pengendalian keuangan di sektor UMKM dengan transparansi dan efisiensi keuangan. Apalagi, pelaku usaha juga bisa mendapatkan akses terhadap pembiayaan yang disalurkan bank digital melalui skema channeling.

“Selama ini bank tidak bersaing dengan teknologi, tapi dengan gede-gedean bunga. Lalu, tiba-tiba muncul bank digital yang menawarkan kemudahan layanan dan akses permodalan. Saat ini Indonesia punya 65 juta UMKM dan sebagian dari mereka belum dapat pinjaman. Bank digital dapat menambah kapasitas pembiayaan itu. Apabila Indonesia ingin memulihkan perekonomian ke level 5%, pertumbuhan kreditnya harus naik tiga kali lipat,” jelasnya.

Dengan berbasiskan data-driven credit scoring, bank digital dapat terus berkembang dengan menyalurkan kredit ke segmen yang belum terjamah. Di masa depan, penyaluran kredit ini dapat memakai indikator rating transaksi nasabah di platform e-commerce, food delivery, atau ride hailing.