With millennial consumers set to dominate the population in the next decade, Indonesian banks are going digital to stay competitive and relevant.
A new report from corporate strategy consulting firm Solidiance, titled «Digital Evolution in Indonesia's Banking Industry» examines how consumer behavior is shaping relationships with the country's financial services industry.
Millennials are projected to account for around 58 percent of Indonesia's total population by 2027.
Unbanked Up For Grabs
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 financial institutions, leaving in the region of 150 million citizens unbanked.
The report also noted that digitalization helps provide greater opportunities for banks to seize the market share.
Foreign Expertise
While overseas banks may possess superior technology and expertise, delivery of digital services depends on the local infrastructure.
This needs to be updated to increase the rate of digital penetration, so more channels are available to customers to address their banking needs.
Fintech Has a Role
This in turn will encourage customers to use digital services. This will cause a shift in demography, where the market will be occupied with digital-native millenials who prefer to use the new channels available them.
Financial technology startups are also working to address the needs of millenials, where traditional banks fall short.
Smartphones to The Fore
The Solidiance report estimated the number of Internet users in Indonesia is expected to explode in the coming years from as low as 35 percent of the population in 2015 to an estimated 68 percent in 2020, on the back of the availability of affordable smartphones and better infrastructure across the expansive archipelago.
«We have to change the way we work, the conservative way is no longer appropriate,» said Hermawan Thendean, vice president of the strategic information technology group at Bank Central Asia, in the report.
