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Jul, 2022     

Indonesia Digital Banking: Consumer Pulse Series

Share of digital transactions has increased by 36% between 2019 and 2021 and Structural trend to sustain with higher digital penetration


1. Unbanked population in Indonesia is more than 30% but Indonesian government is very supportive in providing digital banking licenses to help accelerate the banking population

 

Total unbanked population in Indonesia is 32% (90Million) which is the largest in SEA (absolute terms). Additionally, 25% of the banked population of Indonesia is currently considered underbanked. This creates a meaningful potential for digital banking, by leveraging the high (79%) internet penetration.

Indonesian government aims to accelerate digital banking adoption by granting 7 licenses with additional 7 licenses currently under review stage.

2. Share of digital transactions has increased by 36% between 2019 and 2021 and Structural trend to sustain with higher digital penetration

 

The share of digital transaction increased from 19% in 2019 to 21% in 2021. Digital transactions are likely to sustain their uptrend with higher digital penetration and increasing use-cases.

The fintech players have seen a significant increase in their mobile application downloads over a span of one year from 2020 to 2021. The significant growth is accelerated by offering that is targeted to younger population which attracts them to register as digital bank customers.

3. Digital banks provided an alternative and forced traditional banks to upgrade their service offerings. However, higher cooperation and lower competition could be a positive way forward for both

Currently, tech firms can offer banking services only by acquiring commercial banks or lenders with existing bank licenses.

However, consumers want digital banks to offer more than just financial services. Like super-apps that combine financial offerings together with non-financial services such as e-commerce or health, wellness and travel on one platform.

Accordingly, collaboration, coupled with digital products that suit the needs of the community, could cater to the needs of consumers and drive financial inclusion.

4. Customers value Digital Banks for convenience and easy onboarding. On the flip-side, security concerns is seen as a key concern

 

Our proprietary consumer survey indicates that the people using digital banking are highly satisfied with convenience that it offers along with option to make quick payment transfers. This saves a lot of time for the customers as they can perform quick transfers. Ease of registration that the consumers get is also significant drivers of growth of digital banking.

On the other hand, some of the major roadblocks for the adoption of digital banking are the security concerns. People are not very confident if their confidential information like account details etc. are safe with these platforms.

5. Customers are more satisfied with regional digital banks compared to new Fintech players

 

Awareness for both regional and fintech players are in par but the regional bank has the higher usage. This is possibly because regional digital banks are leveraging their existing customer base to use their digital platforms. Additionally, considering these banks are more established, the biggest pain point of customers about security concerns is also taken care of, leading to higher usage.

NPS scores for digital bank offerings from fintech platforms have a wide variety. However, the leaders have a meaningfully high NPS and not too far from scores of traditional bank’s digital offering.

6. Players are trying to address the gaps through the current offering but there is still scope for improvement

The existing players are trying to address the major customer pain points by implementing strict security measures and personalizing consumer experience.

In order to win the world of digital banking, players should work towards embedding themselves into the daily lives of customers by partnering with other organizations to create an ecosystem to meet the needs of the customers beyond core banking.