Indonesian banks must digitize their services to better cater to technology-savvy millennials, marketing consulting firm Solidiance said in a recent report. (Reuters Photo/Albert Gea)
Indonesian Banks Must Go Digital to Lure Millenials: Report
BY :SARAH YUNIARNI
SEPTEMBER 01, 2017
Jakarta. Indonesian banks must digitize their services to better cater to technology-savvy millennials, strategy consulting firm Solidiance said in a recent report.
The report titled "Digital Evolution in Indonesia's Banking Industry" is the result of research, reports and in-depth interviews with key stakeholders in the archipelago between February and July this year.
The report notes that Indonesia has tremendous potential in banking digitalization as only 36 percent of the country's population is currently connected to financial institutions, leaving about 150 million citizens who are still unbanked.
Indonesia's digital penetration rate, which stood at 34 percent last year, is still low compared with other emerging markets, such as the Philippines (46 percent), China (49 percent), Thailand (56 percent) and Brazil (58 percent). However, it is slightly above India, at 28 percent.
Despite low digital penetration, growth in the number of internet users in Indonesia is expected to boom in the coming years and it is projected to rise by 8 percent to 180.5 million by 2020.
Indonesia's young population will also still increase, with the compound annual growth rate in the number of tech-savvy customers projected to rise by 3 percent to 168 million between 2015 and 2020.
"This millennial generation will demand more digital products and services, including from the banking industry, prompting conventional retail banks to start digitizing their businesses," Gervasius Samosir, an associate partner at Solidiance's Jakarta office, said on Friday (31/08).
He said mobile devices, social media and other digital platforms will play a key role in engaging more customers to use their services and products.
Solidiance's research classified financial institutions either as incumbent banks, or challenger banks.
Incumbent banks are those that have established a significant market share but still need to improve innovation to maintain their customer bases and capture a larger market.
Challenger banks meanwhile refer to those that offer simplified digital products and services, which can challenge incumbent banks.
Among the challengers are mid-sized lender Bank Tabungan Pensiunan Nasional (BTPN) and the local unit of Singapore-based DBS Bank, who are trying to attract millennials with digital services such as Jenius and digibank.
"Both incumbent and challenger banks are trying to win over the millennial generation," Gervasius said.
Solidiance said in its report that banks are now trying to win over millennial customers by finding the best business models and keeping up with innovations in products and services.
The report also said banks need to collaborate with financial technology companies to create a larger market base and expand digital products and services.