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Indonesia gears up for digital banks amid legal vacuum
The eager players to tap into this new form of banking span from traditional banks, including the country’s biggest private lender Bank Central Asia (BCA), to homegrown decacorn Gojek.
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Illustration of digital bank. (Shutterstock/File)
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ndonesia is welcoming a widely anticipated technological disruption in the banking industry in the form of digital banks, despite security concerns and the unavailability of a legal basis for players.
The digital bank is a banking business model that provides services and operates mainly through electronic means, with very a minimal need for or a complete absence of brick-and-mortar offices. In a fully digital bank, every banking activity, process and program, including opening a bank account, is conducted online. Several examples of foreign digital banks include South Korea’s mobile-only KakaoBank, as well as Britain’s Monzo.
In Indonesia, the eager players to tap into this new form of banking span from traditional banks, including the country’s biggest private lender Bank Central Asia (BCA), to homegrown decacorn Gojek, which plans to collaborate with an upcoming digital bank.
BCA spokesperson Hera F. Haryn said the lender’s digital bank, called BCA Digital, will be launched in the first quarter of this year as the company finishes the new bank’s trial period.
BCA injected Rp 1 trillion (US$71.2 million) early last year in Bank Royal Indonesia, which it acquired in 2019, in a bid to make the latter eligible to serve as BCA’s digital bank.
“For the initial launch phase, BCA Digital will focus on funding services by facilitating digital transactions through our smartphone application. We also aim to expand our consumer base,” Hera told The Jakarta Post on Monday.
The pandemic has spurred changes in consumer banking behavior, with digital channels becoming more popular as people avoid in-person transactions amid virus concerns, another trend that is likely to support digital banks.
