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rivate lender Bank Tabungan Pensiunan Nasional (BTPN) is confident it will be able to widen its customer base and to source fresh, cheap funds in the long run, supported by its revamped branchless banking program, its top executive has said.

BTPN deputy president director Djemi Suhenda said the program, dubbed BTPN WOW, was expected to bring in around 10 million new customers in five years.

At present, the lender has a total of 3 million customers, including pensioners, a segment in which the bank has a strong foothold.

The program, which is an extension of the Laku Pandai campaign introduced by the Financial Services Authority (OJK), was launched in Deli Serdang, North Sumatra province, on Monday.

Similar to branchless banking programs that were launched by state lenders Bank Rakyat Indonesia (BRI) and Bank Mandiri a few days earlier, BTPN'€™s WOW aims at reaching the unbanked and underbanked who have not had formal access to banking products through banking agents.

BTPN originally developed the program for Bank Indonesia'€™s (BI) pilot project on digital financial services (DFS) in 2013, which involved five lenders.

When the project ended, the central bank decided that only major banks with core capital of more than Rp 30 trillion (US$2.29 billion) could participate in the official DFS, resulting in BTPN being left out of the game.

However, according to Djemi, BTPN already has 220 branchless banking agents in the North Sumatra and Java provinces for the OJK'€™s Laku Pandai. They are tasked with providing basic savings products and other banking services to their surrounding communities.

It hopes to see the number of agents rise to 85,000 after five years.

'€œHopefully the agent and customer numbers will grow quite significantly in the next five years, but I think it will take us several more years to really feel the program'€™s benefits to our business,'€ he said.

The publicly listed BTPN estimates that it will start to see the positive impact of the program, which is the creation of a cheap funding pool, in its 10th year.

'€œWe can'€™t expect the WOW to immediately generate a large amount of funds because of the nature of the customers themselves. They may only deposit Rp 30,000 in each transaction and their deposits will occasionally decline if they have to withdraw their money,'€ Djemi said.

He added that it was hopeful that the WOW program would drive the proportion of current accounts and saving accounts (CASA) up to 20 percent of the total third-party funds (DPK) in the 10th year from the current contribution
of 15 percent.

BTPN has so far relied on time deposits, also called '€œexpensive funds'€, and loans to finance its own lending expansion.

Time deposits, according to its 2014 financial report, accounted for 85 percent of its total deposit portfolio.

Such a funding structure has been costly for the bank, especially after BI jacked up its benchmark interest rate several times in 2013 and 2014, which eventually dried up funding sources for the banking industry.

The growing costs were reflected within BTPN'€™s costs-of-funds ratio that stood at 9 percent in December, up from 8.8 percent in 2013 and 6.9 percent in 2012. They ultimately ate away the lender'€™s profitability last year as the consolidated net profits fell 13 percent to Rp 1.85 trillion from 2013.