Digital transformation and enhancing the customer experience appears to be the top themes in what technological trends are most likely to take over the banking industry this year and beyond. Based on indices from Forbes, Accenture and DailySocial, here’s what SILOT predicts to change the banking landscape -- not just in Indonesia, but everywhere.
Mobile banking is flourishing in Indonesia because it has high smartphone penetration covering both ends of the economic spectrum: the white collar, multi-tasking city dwellers as well as the communities underserved by banks due to their blue collar professions or remote locations. Mobile banking technology has evolved enough to allow people to open accounts and apply for loans. These services are not a common feature of mobile banking apps just yet, but banks are wising up to market demand. Opening a bank account was once a very regulation-driven process (hence the need to physically enter a bank), but banks are now finding that balance between meeting customer needs and regulatory requirements.
Modern banking is driven by the big data of customer accounts, balances and deposits that need to be analyzed and systematically extracted. Another key driver is the need to better understand customer behavior, which is why many banks are turning to artificial intelligence or AI -- the accumulation of even more data, Since there is no plausible way for banks to store these massive loads of data in-house, banks are turning to the clouds. Partnering with technology companies that offer cloud storage allows banks to optimize their AI tools, analytics capabilities and ultimately become more competitive. The winning banks will be the ones that improve customers’ financial health and performance. This competition will be driven by customer-centric financial services and -- you guessed it -- large quantities of data.
It’s a mutually symbiotic relation: fintech companies -- as in companies that actually develop technology for financing institutions -- have the know-how to create smart solutions for banks, while banks offer fintechs the challenge of ensuring their technology can work across a large client case. On the bank-side, “outsourcing” to fintechs is a big time and cost saver since they don’t have to build teams and design everything in-house. Meanwhile, fintech companies are wired to build and scale-up solutions quickly and offer banks a range of solutions that can be easily integrated into existing platforms. With many Indonesian banks and credit unions looking to digitize their approach to serving customers, fintech partnerships can help reach their goals quicker.
APIs, or Application Programming Interfaces, are essentially the tech solutions provided by fintechs and third parties that allow banks to offer even more services online. Indonesia’s e-commerce boom over the last few years played a significant role in changing bank attitudes towards Open APIs. Since Indonesians tend to favor cash transfers over credit card transactions, e-commerce sales were largely paid through inter-account transfers powered by the API services of partnering banks. Open APIs were originally seen as a security hazard by bank executives but attitudes among major Indonesian banks have shifted as they’ve come to realize that opening the digital doors brings in more business. The DailySocial’s 2020 Corporate Digital Transformation Report shows that Bank Mandiri’s API services has made it possible for them to facilitate transactions with e-commerce, mini-mart chains, state-owned companies, the government tax office, foreign banks, fintech companies and social media platforms. APIs can help improve internal processes and the overall customer experience, fostering healthy competition within the banking sector.