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What can banks do to cope with economic turmoil?
The slowdown has had a subsequent negative impact on the profitability of the banking industry. The banking industry’s return on investment (ROA), which reached 2.77 percent in December 2014, fell to 2.17 percent in December 2016.
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Personal touch: A teller serves a customer at the sharia lender Bank Syariah Bukopin's head office in Central Jakarta on Feb. 7, 2017. (JP/Dera Menra Sijabat)
T
he current economic conditions are quite difficult for the local banking industry. The economic slowdown, which has taken place since the beginning of 2015, has led to a slowdown in the industry. The growth of lending and third-party funds has continued to decline since they reached their peak in 2014.
The slowdown has had a subsequent negative impact on the profitability of the banking industry. The banking industry’s return on investment (ROA), which reached 2.77 percent in December 2014, fell to 2.17 percent in December 2016.
In such a situation, some experts are beginning to assume that banks have begun to enter their sunset period. This is coupled with the emergence of non-bank financial institutions that offer the same services but with easier access.
Financial technology (fintech) firms now offer services similar to banks but with many convenient features that can be accessed while lazing at home. Services such as peer-to-peer (P2P) lending offering loans with easier terms are widely available and certainly do not involve queuing at the bank.
Various obstacles and barriers should be addressed wisely by the banking sector rather than complaining and blaming the global and national economic slowdown.
Setiabudi in his book Power of Kepepet conveys how when someone gets in trouble, he should be grateful that he can in fact resolve the problem. Religion states that obstacles encountered will strengthen one’s faith. The same is true for banks.
With this unfavorable situation, it is important for banks to find a breakthrough or innovation in order to be able to survive and earn higher profits.
