Photo by Ibex

JAKARTA (TheInsiderStories) – Indonesian Banks Association is gearing up to face the challenge in digitalization and modernization of banking service as the increasing of transformation in technology and to meet the needs of millennial generation.

Kartika Wirjoatmodjo Chairman of Perbanas explained, customers transaction in bank office has declined from time to time, showing society more into digital transaction recently. Digitalization was expected can slash the operational cost for banks and engage customers widely across nation through its technology.

He urged domestic banks to capture the potential by improving service in technology. In order to upgrade the financial inclusiveness, he estimated roughly each bank needs to spend Rp1- Rp4 trillion.

“Enterpreneur in banking service, transportation and retail have predicted the same issue which is digitalization and technology innovation,” said Wirjoatmodjo on Indonesia Banking Expo (Ibex) 2017, Tuesday (19/9).

Indonesia’s population of more than 260 million people is a sizable opportunity for the banking industry since only 36 percent of the population are connected to formal financial institutions, leaving 150 million citizens unbanked.

Millennials — or those who were born between the 1980s to 2000s and considered a tech savvy population — are projected to account for around 58 percent of Indonesia’s total population by 2027.

According to Agus Martowardojo, Indonesia Central Bank Governor, the utilization of the digital revolution in the economic activities could boost the economy to grow by 7 percent (year on year), compared to the current growth rate of around 5 percent. In the calculation of BI, during 2016, the users of e-commerce had spent Rp75 trillion.

In addition to e-commerce, digital revolution in Indonesia touched the financial sector because the number of financial technology companies in Indonesia grew by 78 percent in the last two years (2015-2016).

However, he noted, the potential of digital revolution and big data services are still very large. Many Indonesians have not received advantages from the digital revolution. The central bank also wants to give equality of regulation for domestic players and foreign player.

“We don’t want the competition in Indonesia is not having the same level of playing field. We have to maintain if there’s an international player get into Indonesia, we will welcome, but at least they are in the same level,” Martowardojo said.

In recent years, Bank Indonesia has utilized the optimized big data services to support decision-making process. Big data services can strengthen decision-making process in monetary, financial markets, financial system stability, payment system and others.

Based on research conducted by Google and AT Kearney, a number of investments towards startup companies have increased 68 folds in the past five years. This trend shows that investor confidence in the startup industry has improved significantly.

“The growth of Ventura Capital (VC) in Indonesia during the past five years has been explosive by improving 60 times larger,” said Mifza Muzayan, Google Sales Operations & Strategy Lead. He predicts a positive outlook for Indonesia in the next year or two.

In 2016, the total amount of investments in startup companies amounted to US$1,4 billion. That number has since risen to US$3,0 billion up to the eighth month of 2017.

“We can see the startup investment momentum has increased two folds compared to 2016. This discovery is really useful, and we hope that it can help elevate investments towards the startup ecosystem even further,” said Managing Director of Google Indonesia Tony Keusgen.

Venture capital investors continue to believe in the Indonesian investment opportunity, considering the economic growth of the country, the rising number of the middle class, and the large population of young people that are tech-literate.

Writing by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com

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