Jakarta. Bank Indonesia is suggesting that local banks should cooperate with digital banks and financial technology companies, or fintech, to maintain their bargaining position amid a customer exodus to these more innovative firms.
Bank Indonesia Payment System Policy director Farida Paringaninangin said that by working together, both institutions can learn from each other and attract a greater customers base.
"Technology should not threaten local banks, but it should complement their existing banking system and increase their performance," Farida told the Jakarta Globe on Saturday (03/12).
The response came after global management consulting firm Bain & Company released its annual report, which states that global consumer banks may have an unattractive future as they often lose out to direct banks – which offer services via online and telephone banking – and fintech, because of simple product systems and excellent user experiences.
The seventh annual report titled "Customer Loyalty in Retail Banking" also says customers, especially in developing markets, buy new banking products and services – such as credit cards, loans, insurance and investments – from competitor that have better digital marketing, sales and service.
"These banks recognize the importance of consumers' place in simple, digital banking and they are already well ahead of the curve in successfully delivering that value, rather than just providing transactional services," Bain & Company partner and Southeast Asia head of financial services Seow-Chien Chew said in a statement received by the Jakarta Globe last week.
"It's easy to say fintech and technology companies are going after the high-value banking activity, but it's also the more innovative established players that are winning a disproportionate share," Chew said.
However, the report pointed out that customer disloyalty has increased the urgency for retail banks to strengthen their digital channels, as younger generations will learn to purchase banking products through online channels, which further increase the gap between the digital leaders and the laggards.
Bain & Company polled more than 137,034 consumers of national branch banks, regional banks, private banks, direct banks, community banks and credit unions in 21 countries between July and September this year.
The survey was conducted in Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Malaysia, Mexico, the Netherlands, Poland, Singapore, South Korea, Spain, Sweden, Switzerland, the United Kingdom and United States.
Bain & Company also found that excellent products, prices and salesmanship from other banks contributed to customer disloyalty.
"The bigger challenge lies in how to organize the transition – from conventional to digital service/system – both at the frontline and in the back office, to improve how consumers do their banking," Chew said.