AI will power the future of the banking experience in Indonesia

Indonesia’s banking and financial services industry is undergoing a dramatic shift in digital transformation as we begin 2022 with hungrier, more nimble digital banks and fintechs slamming on their heels and disrupting the traditional banking system.

Despite the rapid changes, many of Indonesia’s 275 million people remain underbanked, many without easy access to physical bank branches, especially in more remote regions and islands. The country’s financial services sector is now looking to digitize itself and keep up with the massive changes in consumer behavior brought on by Covid-19, not only in banking but across industries.

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

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

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

In the face of lockdowns linked to Covid19, people of all ages have adopted or have been forced to use their smartphones for everything from food deliveries to e-commerce, entertainment, e-payments and basic online banking.

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 standing in line at a bank branch or being put on hold by a call center, they will want to perform banking anywhere, anytime. In the future, they will also demand the same kind of frictionless digital experiences in other areas of their lives, when they shop, eat, work, pay and play.

They will also expect to have access to personalized products tailored to their stages of life and crave a smarter digital banking experience: Research shows four in five people are willing to disclose personal financial data in exchange for better. lower interest rates or fees from banks.

Many of these potential customers are from Tier 2 and 3 cities with difficult access to physical bank branches. This means that they will opt for banks that can help them integrate them digitally while offering personalized microfinance services.

No return

In this context, Indonesia’s legacy financial institutions need to fundamentally rethink 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, faster and more transparent to be at every touchpoint of their customers’ daily lives to ensure loyalty and loyalty. .

This gave birth to the concept of a digital ecosystem in which financial services are integrated with a wider range of services such as e-commerce, food and grocery, ridesharing, travel and retail.

Time is running out: digital banks that have been able to respond quickly to changing consumer habits despite operating without physical branches already have the first-mover advantage.

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

Artificial intelligence will fuel the Indonesian banking ecosystem

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

AI will also fuel smoother banking experiences that are still in development (such as invisible and voice payments). Today’s AI-powered eKYC and anti-fraud technologies already allow customers to open a bank account through a smartphone in minutes, anytime, anywhere.

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

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

With all of this in mind, a New Year’s resolution for Indonesian banks should learn about AI and understand that it is no longer an emerging technology but an essential technology – essential for stay relevant in the age of digital transformation.

So this will be one of the critical challenges that banks will face in 2022: how to capture the hearts and minds of the new post-Covid digital consumer. AI and its associated technologies will be essential to achieve this.

Ronald Molenaar is the Commercial Director for Indonesia at Advance.ai, which partners with more than 800 corporate clients in the areas of eKYC, digital identity verification, credit scoring and fraud management. The company is part of the Advance Intelligence Group, one of the largest independent technology startups based in Singapore, valued at $ 2 billion.

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