Analysis: Banks working in harmony with surging economy

From almost every corner, from almost every industry, good news continues to pour in. No wonder forecasts for 2011 have been revised upwards to 6.3 percent in GDP growth. Critics will say that’s conservative. Self-proclaimed realists will tell you that the primary constraint to Indonesia’s true potential is endemic corruption.

Associates of the recently convicted Anggodo were seen joyously celebrating the token four years handed out as punishment for one of the most shameful scandals in the country’s history. If the rest of the electorate watching the months of drama could have been photographed together, a very dark picture would have been the likely result. Spectators from around the world would be shaking their heads yet again at a system that convicts a marijuana peddler to life imprisonment but gives a wink-and-a-nod to people who have robbed the poorest millions of many trillions. It’s obvious to wellwishers everywhere that this is a country blessed with incalculable natural resources, kept poor only by a callous elite.

But the man on the street continues his slow but sure march forward. Businesses big and small continue
to prosper. The micro-businesses that are disappearing are gaining from more stable jobs many of
them are electing to take up instead. As a consequence of more jobs and better wages, banks greasing the wheels of the economy are also gaining from a new influx of account holders joining and re-joining the banking sector. The number of Indonesians with at least one bank account grew to 27 million, with 1.5 million new entrants in the April-June quarter alone. Now 21 percent of the population 18 years and older have a banking relationship, a memorable turnaround after years of dwindling numbers.

The overwhelming majority of customers choose one of the Big Four banks for their savings and loans. In fact, these giants account for almost 80 percent of all people who have “any financial relationship” with a formal institution. To the credit of the behemoths, especially the publicly-owned three, they are taking big steps forward in attracting new and keeping old customers. The fact that all three are subscribers to Roy Morgan Single Source should not discolor judgment, mine or yours. Let the facts speak for themselves.

In a culture known for its instinctive desire to forgive and a shy inability to criticize, Indonesian banks enjoy unusually high levels of customer satisfaction. Against that backdrop BCA has been the gold standard, with around 95 percent of its customers ‘fairly’ or ‘very’ satisfied, year after year. That achievement has been unwavering at the national level. But it is the progress made by the three national banks that should please all Indonesians, customers and non-customers alike. Not only have they been on a remarkable trajectory upwards, a national bank has for the first time overtaken BCA. As at June 2010, Bank Mandiri had 96 percent of its customers satisfied with its services. With BRI at 90 and BNI at 93 percent satisfaction levels, all three are at all-time highs. In other words, eight out of 10 bank customers have never had it better. At Roy Morgan Research, we have reason to believe that none of them are resting on their laurels. Measured on the same parameters by actual customers of the banks, they are all speaking a common language today. The problems and the opportunities are visible for each subscriber to the research, but the key lies in what each of them are doing with the knowledge, in strict confidence.

One visible problem is the obvious strain that heightened standards and growing competition bring. Compounding the challenge are the increasing numbers of people with more than one banking relationship, a behavioral pattern noticeably on the rise. One of the consequences is the decline in the number of people who believe that one of their relationships gives a particular bank ‘MFI’ status, or Main Financial Relationship. Some 3 million bank customers choose not to name one now. For most people, the emotional answer to the question is influenced by where their income is deposited, where the main transactions and bill payments are made from. But for many, that response is not as easily forthcoming. One cue lies in the number of credit cards proudly displayed in brand-name wallets, often more than five. Another possible explanation is the growing phenomenon of consumer loans, pulling at the heart-strings, straining old relationships. In a word, fragmentation is coming to Indonesian consumer banking. More competition will create more pressure on existing relationships between customers and banks. With standards moving ever higher, with greater expectations to meet, everybody wins. That includes the banks, not only the customers.

These conclusions are based on Roy Morgan Single Source, the country’s largest syndicated survey. With over 6,000 new respondents interviewed each quarter, the annual total exceeds 25,000 per annum. The findings are projected to reflect over 85 percent of the population 14 years and older, living in the cities, towns and villages of this large archipelago. Sri Mulyani left under turbulent clouds, but Agus Martowardjojo has joined to appreciative applause. Good news or bad, we live in hope.

The writer can be contacted at debnath.guharoy@roymorgan.com.