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Blockchain will change banking industry
Blockchain holds the potential for all participants in a business network to share a system of record.
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A teller on a bank. Banking industry in Indonesia is undergoing a significant transformation driven by technology. (Shutterstock/File)
T
he Indonesian banking industry is clearly the most attractive market in Southeast Asia. The margins are not just good, they are excellent. Having more immediate prospects for loan growth and economic growth are not the main drivers for that attraction, but rather the longer term upside potential of a large market with low penetration. But in the meantime, high margins make for attractive, profitable banking.
But the banking industry in Indonesia is undergoing a significant transformation driven by technology. Vikram Pandit, who ran Citigroup during the 2008 financial crisis, had said developments in technology could cut the number of banking jobs by 30 percent in the next five years.
With advances in technology, the relationship that customers have with their bank and with their finances has changed. Customers rely less and less on walking into a branch for their banking needs, and instead have digital options to help them: ATMs, online chat, mobile phones and internet banking.
In Indonesia, a “branchless banking” program was launched in March 2015 to reach out to the unbanked people. The aim is financial inclusion as banking penetration is still quite low. New regulations allow the appointment of third-party agents (for the banks) equipped with new technology to spread banking services.
There is no doubt that banks need to invest in information technology to become more efficient through automation and digitalization, therefore there will be over the long term a reduction in staff expenses and an increase in IT expenses. Investments in financial technology have grown exponentially in the past decade, rising from US$1.8 billion in 2010 to $19 billion in 2015 with over 70 percent of this investment focusing on the “last mile” of user experience in the consumer space. Technology is affecting financial services in a multitude of ways like blockchain, financial cloud computing, data analytics, etc.
Blockchain, the shared ledger technology that allows any participant in a business network to see the system of record will have a transformative impact on a number of industries, including financial services, in the future.
Blockchain is still in its relative infancy, but a number of initiatives under way are already driving its progression to an industrial solution which will yield several important benefits in the context of the transfer of assets within business networks. Blockchain holds the potential for all participants in a business network to share a system of record.
