H

opes are high for regional development banks to reach more potential customers in remote areas following the issuance of a new regulation on digital financial services by Bank Indonesia (BI).

The regulation, issued in late August by the central bank, revises a 2009 regulation on electronic money and allows medium-sized banks under the BUKU III category and regional development banks (BPD) in the BUKU I or BUKU II categories to employ individual banking agents to reach out to unbanked customers in remote areas without the need to make new investments to open physical branches.

The BUKU III category includes banks with a core capital of between Rp 5 trillion (US$385 million) and Rp 30 trillion, while banks in the BUKU I and BUKU II categories have a core capital below Rp 1 trillion and between Rp 1 trillion and Rp 5 trillion, respectively.

BI has since issued a number of circular letters to regulate technicalities regarding the services, with the latest one published on Sept. 27.

In response to the new rule, the East Java administration’s regional development lender, Bank Jatim, is set to launch a digital financial service, popularly known as branchless banking, by the end of the year. The publicly listed bank has also been preparing its individual and institutional agents while waiting for the final approval from the Financial Services Authority (OJK) for its branchless banking services.

“We are an inch away of securing the approval,” Bank Jatim corporate secretary Ferdian Satyagraha told The Jakarta Post on Wednesday.

“After securing the approval, we plan to deploy our agents to five regions, namely Banyuwangi, Nganjuk, Malang, Bojonegoro and Jember, where our bank has so far managed a considerable amount of transactions.”

Bank Jatim, Ferdian said, initially plans to deploy 100 individual agents, most of whom own warong (small convenience shops). A list of potential agents was previously proposed by Bank Jatim’s local branches before receiving final approval from the bank’s headquarters.

The lender is aiming to increase its fee-based income, especially that related to the use of mobile banking, short message service (SMS) banking, phone credit payment and electronic data capture (EDC) machines. Ferdian, however, said his firm was unable to mention any figure until the program was launched and provided results that could be used to calculate its target.

“The potential, especially in remote areas, is huge,” he said. “As many as 80 percent of our 4 million customers live in such regions, as it is difficult for us to attract customers in Surabaya amid fierce competition with major national banks,” he stated, referring to Indonesia’s second largest city, which is also the capital city of the East Java province.

Another regional development lender, Bank Jabar Banten (BJB), expressed hope the service could enable it to provide better services to its customers living in remote parts of West Java and Banten provinces.

“Our customers are spread out in the areas. This service will help them [get banking services] and at the same time help our operations be more cost-effective and efficient,” BJB compliance and risk management director Agus Mulyana wrote in a text message.

The lender is in the process of upgrading its information and technology infrastructure and improving cooperation with third parties, especially in terms of e-commerce, in order to be able to obtain the required licenses from the OJK. It plans to operate the digital branches next year, Agus said.

“We are ready to implement it and support the government’s efforts to open wider access to financial services for the public,” he stated.

President Joko “Jokowi” Widodo’s administration aims for 75 percent of the population to have access to banks by 2019, higher than the 36 percent mark set in 2014.