Where will digital banking be in Indonesia in the next five years?

Where will digital banking be in Indonesia in the next five years?

Given the country’s competitive landscape and overall receptiveness to technological innovations, digital banking will be an industry to watch in Indonesia. But who are the leading players of the game? How quickly are they growing? And where is the whole industry heading?

These were some of the questions raised at the briefing, “Rise of Digital Banking in Indonesia”. During this webinar organized by The Jakarta Post, we gathered perspectives from OJK, Jenius, and other key stakeholders on the outlook of digital banking.

Here are some of the highlights from the discussion– for more insights, you can check out our “Digital Banks in Indonesia” report or access the full recording at The Jakarta Post’s YouTube channel.

Do note that the perspectives shared by the panellists here do not necessarily represent the view of our team at Momentum Works. 

Digital banking is growing, fast

According to Anung Herlianto, OJK’s Executive Director of Banking Research and Regulations, the Covid-19 pandemic has accelerated the digitalization of banking and other economic activities, with the transaction volume of digital banking increasing by over 40% in the past year. 

This shift towards a virtual economy is facilitated by Indonesia’s high levels of digital penetration: 

As well as favourable government policies:

Jenius’s lead in digital banking

In our report, we note that Jenius –the first-mover in Indonesia’s digital banking scene– remains the leading player with the highest number of users. That being said, competition, which was timid before 2020, has really started to heat up.

Based on the figures provided by Darmadi Sutanto, Bank BTPN Deputy President Director, Jenius’s steady growth has continued in spite of the pandemic, with its average number of transactions per month doubling between 2019 and 2020.

While its average transaction volume per month now hovers slightly below 14 trillion:

Jenius’s competitive advantage lies in its comprehensive range of products and services that are tailored to its users’ everyday needs, including shopping/e-commerce (Jenius QR), savings (Flexi Saver), and overseas transactions.

When we surveyed users about Indonesia’s digital banks, they also rated Jenius decidedly higher than its competitors when it comes to the quality of banking products. In other aspects, however, TMRW by UOB and Digibank are leading Jenius. 

Jenius’s core target audience may still be millennials that are saving for large consumables, but it has sought to expand its market share by branching out to new demographics. Recent features, such as Payroll and Jenius for Business, cater more towards entrepreneurs and SMEs.

A group that this digital bank is particularly interested in is the older, less tech-savvy generation of Indonesians– or what Sutanto refers to as “selennials” (senior millennials). 

They hope to make digital banking more accessible for them, which is why they are incorporating traditional banking features, including offline branches and international debit cards. 

The roadmap of digital banking

In outlining the roadmap for digital banking, Herlianto revealed how the government will continue to be heavily involved in the industry, as it looks to accelerate Indonesia’s digital banking transformation while strengthening regulatory and supervisory infrastructure with its short-term and structural policies.

In particular, these reforms in supervisory infrastructure will also lead to an increased reliance on both AI and big data analytics, so that digital banks can identify emerging supervisory risks and quickly intervene. 

Growth opportunities in digital banking

Another area that presents opportunities that are unique to Indonesia’s digital banking industry is Islamic/Shariah banking, especially since the country has the world’s largest Muslim population.

Riko Wardhana, the Digital Banking Product Head of Bank Syariah Indonesia (BSI), pointed out how Indonesia’s first major Islamic bank, which was formed from the merger of three Sharia banks, has quickly become the second-biggest lender with over 50 million customers.

These numbers are likely to increase as Indonesia pushes to become a Sharia finance hub. 

With this growth potential, Islamic banking is an area for digital banking to tap into– between 2019 and 2021, BSI’s digital banking users have already more than doubled.

Still early days for digital banking

While the competition has quickly heated up in the arena of digital banking, the dust has yet to settle – far from it, in fact.

Jenius, as the first mover, still commands a lead, but the newer entrants are already closing the gap with their aggressive growth. Tech players have also entered the game, but their real game is probably still less well understood by many of their traditional competitors. 

All we know is that the market remains largely untapped, and the government’s setting the stage for these stakeholders to tussle it out. 

Expect more innovations and more competition, as competitors try to find more compelling reasons for consumers to try digital banking (and hopefully stick with it).