D

igital banking should have taken off in Indonesia. And yet it hasn'€™t. The first bank or non-bank financial organization that obtains the proper banking licenses and truly embraces the service is poised to win the banking market in Indonesia.

Digital banking services mean different things to different people. Many banks in Indonesia still view digital banking only as another alternative channel, such as internet banking or mobile banking. But in other markets, digital banking is now also about how non-bank organizations can provide banking services through their platforms; about banks exploring a different business model to extend their products and services to increase revenue as well as being relevant and significant to their customers in their day-to-day activities. All of this requires thinking '€œoutside the box'€.

Digital banking not only could, but should, take off in Indonesia. Accenture'€™s 2014 Digital Consumer Survey of 1,000 Indonesians found that 82 percent of respondents own a smartphone. Given the vast and far-flung archipelago that makes up our country, digital services make far more sense than trying to expand banking by building more '€œbrick and mortar'€ banks. And Indonesian consumers are hungry for new and innovative products: 41 percent of Indonesians either like to be the first to own, or try out, the latest products and services, according to the survey.

Yet, digital banking in Indonesia is still in its infancy in Indonesia. Why is that?

It'€™s a combination of reasons: Factors such as complex regulations, as well as the cost of investment (in money and time) constrain many players. Feelings of apprehension about changing existing organizational and operating models, as well as business and revenue models, also delay decisions to focus more on digital banking.

There is no digital market leader in Indonesia yet. Some banks appear to be waiting to follow a lead, others would prefer to start small and incrementally build digital services and still others are trying to draw up a long-term, comprehensive roadmap of their own, before they start the journey.

During our discussions with senior bankers in Indonesia, many have asked: who should drive the digital banking change within the organization? Is it a bank'€™s business executives? Or should the technology team take the lead on this journey? In reality, it requires both teams to drive digital plans '€” with top management leadership focused on the journey. And it requires a willingness to change operating models to be more agile and adaptive to multi-speed changes that provide truly digitalized service to customers, as well as cutting-edge back-end processes that make it all real.

Information is currency in the digital era, but a bank needs to have a business model that converts this '€œcurrency'€ into something positive in its annual report either as an increase in assets, revenue or profitability, or an increase in the number of loyal customers. To achieve that, analytics will be important not only for the back office and reporting purposes but also to improve customer experience and personalization through various sources of information including social media. This is a digital tool no bank can afford to ignore.

In all of our discussions with top managements at Indonesian banks, we are hearing positive signals that digital banking will be part of their near-future strategy and execution. But at the same time, many non-bank organizations are prepared to move at a relatively faster pace, and are willing to disrupt the industry. This means that in the near future banks may have to make a decision on digital banking or else they risk being relegated to second place by non-traditional competitors.
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Meliza Rusli is managing director and head of financial services at Accenture Indonesia, and Dianne Rajaratnam is senior manager for Accenture Indonesia.