Nowadays, digitalization has disrupted lots of conventional businesses. Companies that have been established for over a decade are now competing head-to-head against startups-most of which were founded in the last five years. In Indonesia, the major change can be seen in financial industry with the boom of startups delivering innovations from a combination between financial services and technology. The new phenomenon called financial technology, or popularly known as fintech, boasts convenient procedures and seamless process in obtaining financial services in far simpler way compared with the conventional finance company. As of February, there are 99 fintech companies registered at the Financial Services Authority (OJK). These fintechs are specifically targeting unbanked people in Indonesia, which are 95 million people according to World Bank Global Findex 2017.
To stay updated with the changing trend, DBS Indonesia launched a consumer-banking product called Digibank. The name itself is self-explained, the product promotes a digital access to banking services through smartphone application. The subsidiary of Singapore-based lender claims the product, which is only available in Indonesia and India, as a purely paperless banking product.
“We want the smartphone to substitute brick-and-mortar banks. So the smartphone becomes the bank itself, not merely an extension for banking services in a smartphone,” says DBS Indonesia President Director Paulus Irwan Sutisna, 54, adding that the bank currently has 44 branches throughout Indonesia and has no plan to open more.
With digibank, those who want to open a bank account simply need to fill in data form on the application and set an appointment with an agent who will bring a device to verify customer’s biometric data. The biometric verification can also be done at Biometric Station available in 27 coffee shops in Jakarta, Bandung, Surabaya and Yogyakarta. The bank is cooperating with Home Ministry’s Population and Civil Registry Agency (Dukcapil) to obtain biometric data from customers’ e-KTP, as well as a local startup to outsource the verification agents in Greater Jakarta Area, Bandung, Surabaya, Semarang, Yogyakarta and Medan.
It takes no minimum balance to open an account. Once it is set up, the customer is able to transfer fund up to Rp 200 million to other bank account through the application without administration fee. The bank also enables customer to withdraw money and check balance through any ATM machine that partners with ALTO, ATM Bersama or PRIMA networks free of charge for up to 100 transactions each month. Other features include spending tracker, 24-hour virtual assistant, e-wallet top-up and bill payments, as well as personal loan application.
Since the launching in August 2017, DBS Indonesia has got 600,000 new customers through its Digibank, with a growth rate of around 1,000 new accounts each day. Prior to the launch, the lender was focused on corporate and SMEs clients with only a total of 100,000 customers. So far, 42% of digibank’s customers are under 28 years old and 73% coming from greater Jakarta. The digibank customers spread matches its target market; the urban digital savvy millennials. The bank aims to have at least 3.5 million customers within five years operation of digibank since they plan to make it as one of their main banking products in the future.
Paulus says they have yet to set a revenue target from digibank because they still focus on the amount of customers. He also adds that the bank has no plan to charge digibank customers with administration fee since the product offers efficiency in attracting more customers without opening more branches. A 450 sqm branch office typically cost Rp 5.5 billion. The growing number of customers, balances and personal loans in Digibank will later automatically contribute to the bank revenue, he explains.
However, it is a challenge for the bank to make sure the customers keep using Digibank instead of running away after registering—since there is no minimum balance. For that, Paulus says the bank will cooperate with e- commerce companies in providing seamless payment system, one of which will be announced sometime around this year. Currently, Digibank is partnering with 19 merchants including Mandiri e-Money, Telkomsel, GOPAY, M-tix, PLN and MOGPlay.
“We are trying to be embedded in the e-commerce world because people are busy shopping in that platform nowadays. Our dream is that one day the transaction can be done without having to switch between e-commerce and banking application, so the process will be totally seamless,” Paulus explains.
In terms of security, he says that DBS Group hires the so-called white hackers to try to hack their system and find loopholes to be fixed. DBS has a global reputation in security. It is listed in the Global Top 50 World’s Safest Banks from Global Finance Magazine for 10 consecutive years. He also claims biometric verification used for digibank to be safer than signature, which can be easily fabricated.
According to the bank’s financial report, as of third quarter of 2018, DBS Indonesia booked Rp 2.9 trillion net interest income, up by 31.8% year-on-year from Rp 2.2 trillion. It also recorded Rp 57,608 trillion in outstanding loans, with 3.11% gross non-performing loans.
To be totally in tune with digitalization, Paulus says DBS Indonesia starts to utilize big data from a local telecommunication company for credit scoring with a newly launched system named Algo Lending. The system is applied for personal loans approval. It works by using data from the telecommunication company to analyze customer’s spending and behavior for credit scoring. The score will help DBS Indonesia decide whether to approve the loan application or not. This way the bank could manage bad loans better.
“Data from a telecommunication company is very rich. For instance, we can discover customer’s spending and current residence, and verify whether it is true from the data. No need paper documents to apply for personal loans,” Paulus says.