A customer uses Bank Central Asia's banking app on their smartphone on Apr 23, 2021. (ID Photo/David Gita Roza)

AI Will Power The Future of Banking Experience in Indonesia


JANUARY 12, 2022

The banking and financial services industry in Indonesia is undergoing a radical step change in digital transformation as we begin 2022 with digital banks and hungrier, nimbler fintechs snapping at their heels and disrupting traditional banking.

Despite the rapid changes, many of Indonesia’s 275 million population remain underbanked, with many not having easy access to physical bank branches, especially in more remote areas and islands. The country’s financial services sector is now looking to digitize and keep up with massive changes in consumer behavior brought on by Covid-19, not just in banking but across every sector.


Some statistics to consider: 78 percent of Indonesian consumers already actively use digital banking, according to the McKinsey Personal Financial Services 2021 survey. The same survey found 55 percent of Indonesians use cashless often than pre-pandemic, while 80 percent expect to maintain or increase their mobile and online banking use in the future.

Technology is already re-imagining the future of bank-customer relationships in Indonesia, and traditional banks should urgently rethink and reshape the entire customer banking journey and their role in the broader digital ecosystem.

Indonesia has one of the highest rates of smartphone penetration in the world at between 70 and 80 percent of the population, and Covid-19 has only accentuated the growth of time spent online - with clear implications for the need to redesign the mobile banking experience as a next step on from a simple desktop or web experience.

Faced with Covid19-related lockdowns, people of all ages have embraced or been forced to use their smartphones for everything from food deliveries to e-commerce, entertainment, e-payments, and basic online banking activities.

What Does This Mean for The Future of Banking in Indonesia?

In this new post-Covid era, customers will demand value, convenience, and speed - instead of queuing at a bank branch or being put on hold by a call center, they will want to bank anywhere, anytime. Moving forward, they will demand the same kind of frictionless digital experiences in other areas of their life, too, as they shop, eat, work, pay and play.

They will also expect access to personalized products that suit their life stages and are hungry for a smarter digital banking experience: research shows that four in five are willing to disclose personal financial data in return for better interest rates or lower fees from banks.

Many of these potential customers hail from Tier 2 and 3 cities with inconvenient access to physical bank branches. This means they will opt for banks that can help onboard them digitally while still offering personalized micro-financing services.

No Going Back

Amid this backdrop, Indonesia’s incumbent financial institutions need to fundamentally redesign the customer experience around the lifestyles of a post-Covid19 generation. They also need to rethink their customer acquisition strategy and assess how they can make banking smarter, speedier, and more seamless to be at every touchpoint of their customers’ daily lives to ensure stickiness and loyalty.

This has given rise to the concept of a digital ecosystem where financial services are embedded within a wider array of services such as e-commerce, food and groceries, ride-hailing, travel, and retail.

Time is of the essence: digital banks that have been quick to meet evolving consumption habits despite operating without physical branches already have the first-mover advantage.

To be clear, digital banks are already here: the central bank in Singapore, for example, has already issued four virtual bank licenses, while Malaysia plans to issue up to five permits by Q1 2022, and Indonesia is following suit with as many as 12 digibanks operating in the country.

Artificial Intelligence Will Power Indonesia’s Banking Ecosystem

Artificial intelligence will redefine the future of bank-customer relationships in Indonesia’s new banking ecosystem: for example, banks across the region have already started using biometric authentication such as facial and fingerprint recognition to facilitate online money transfers.

AI will also power more frictionless banking experiences that are still being developed (such as invisible and voice-enabled payments). Today’s AI-powered eKYC and anti-fraud technology are already enabling customers to open a bank account via a smartphone in a matter of minutes, anytime, anywhere.

AI is already enabling banks to determine credit scoring beyond traditional data by tapping on alternative data pools such as a customer’s smartphone type, data package, and e-commerce transactions to assess creditworthiness and drive financial inclusion among both customers and businesses that may be underserved by traditional banking.

Finally, AI will combat and prevent rising online fraud, lowering the reputational and financial risk for banking institutions while automating many repetitive manual processes that increase cost and resource efficiency.

With all this in mind, a new year’s resolution for Indonesia’s banks should educate themselves on AI and understand that it is no longer an emerging technology but an essential one - critical to staying relevant in this age of digital transformation.

This, then, will be one of the critical challenges banks face in 2022: how to capture the hearts and minds of the new post-Covid digital-first consumer. AI, and its associated technologies, will be essential to achieving that.

Ronald Molenaar is the business director for Indonesia at Advance.ai, which partners 800+ enterprise clients in eKYC, digital identity verification, credit scoring, and fraud management. The company is part of Advance Intelligence Group, one of the largest independent technology startups based in Singapore, valued at $2 billion.