Early adopters of branchless and electronic banking services in Indonesia are vulnerable to agent misconduct due to a low public awareness of banking products, says a survey conducted by financial service consultancy firm MicroSave published on Tuesday (16/05). (Antara Photo/Yusran Uccang)

Branchless Banking Customers Vulnerable to Overcharges, Data Breaches: Survey


MAY 17, 2017

Jakarta. Early adopters of branchless and electronic banking services in Indonesia are vulnerable to agent misconduct due to a low public awareness of banking products, says a survey conducted by financial service consultancy firm MicroSave published on Tuesday (16/05).

The survey, which sampled 1,414 customers across 15 provinces in Indonesia, found that only 27 percent of branchless banking users and 15 percent of e-money users across the archipelago are aware of transaction charges imposed by banks. As a result, customers are left vulnerable to overcharges by banking agents.

"Agents usually charge 'thank you fees' for almost all transactions," Ghiyazuddin Mohammad, a senior manager at MicroSave, said.

Agents are typically the main conduit of information for branchless banking customers regarding transaction fees. According to the survey, 74 percent of digital financial services users in urban areas and 88 percent of users in rural areas rely solely on their agents – who typically print their own pamphlets that advertise false transaction fees – for relevant information, Mohammad said.

The survey also found that 91 percent of the users who rely on agents to conduct their banking transactions share confidential information with those representatives, including 5 percent of customers who were found to actually disclose their own pin numbers.

Conducted from February-April this year, the survey aims to identify risks for customers who opt to use digital banking services across the archipelago by examining existing policies and recommending changes to those policies to mitigate customer vulnerability.

In November 2016, the government passed a regulation requiring all banks who offer electronic services to also offer branchless banking services — known locally as Laku Pandai — to allow individual agents to offer basic banking services to customers through mobile phones, in a bid to increase local banking.

According to the MicroSave's survey, branchless banking services are better suited to expand already existing financial services; for instance, 30 percent of branchless banking customers never used financial products prior to their new accounts, compared with just 15 percent of electronic banking customers.

There are currently 5.1 million Laku Pandai customers across the archipelago, served by some 300,000 agents, said Eko Ariatoro, director of financial inclusion development at the Financial Services Authority (OJK). Those figures are significantly higher than the 1.2 million customers served by 60,805 agents by the end of 2015.

The government has stated that it will seek to bank at least 75 percent of all Indonesian adults – who number 67 million – or provide them with financial services of some kind by 2019.

MicroSave recommends digital financial service providers to invest more in preventing fraudulent agents to distribute false information to customers through brochures, SMS alerts and marketing campaigns. The firm also recommends regulators, in collaboration with service providers, to establish training centers for agents across the archipelago.

The survey highlighted that well-known banks, such as state-owned Bank Rakyat Indonesia and Bank Mandiri, fared better in building awareness among users.

The findings of MicroSave's survey come as an important tool for the central bank, Bank Indonesia (BI), as they mull new guidelines to prevent future fraudulent activity, said Pungky P. Wibowo, BI's director for electronic banking and financial inclusion.

"We are tackling these issues."

According to Pungky, BI will "in a matter of days" release new regulations to standardize charges imposed by branchless banking and electronic money service providers.