Compliance Challenges in Digital Banking in Indonesia Pose Significant Growth Opportunities

Digital technology is transforming the banking landscape in Indonesia at a rapid pace. According to our latest survey of financial services customers, there has been considerable growth in the adoption of internet and mobile banking, indicating that digital channels will become increasingly crucial in building loyalty and generating growth for financial institutions.

The Shift towards Digital Banking in Indonesia

The Indonesia research shows a significant shift towards digital channels, with 58 percent of consumers now using digital banking channels. This is in line with other emerging Asian markets. Several factors have contributed to this migration, including:

• Increasing adoption of the internet and smartphones
• Growing popularity of e-commerce

Trends Shaping Retail Banking in Indonesia

Three trends are shaping retail banking in Indonesia:

• Diversification of banking relationships
• Increasing receptiveness of consumers to digital propositions
• Increasing value of digitally active consumers

Challenges for Indonesian Banks

Indonesian banks must address decreasing customer loyalty and increase product penetration to remain competitive. With 55 percent of non-digital customers likely to use digital banking within the next six months, there is a significant opportunity for digital players to enter the market.

The Role of Branches in Indonesia

Despite the growth in digital banking, branches will continue to be relevant in Indonesia. Convenience and security concerns are still major factors in consumers’ choice of bank.

The Value of Digitally Active Consumers

Digitally active consumers are more valuable to banks, with twice the loyalty and purchasing activity compared to non-digital consumers. Banks must invest in new digital capabilities and become more agile to capture the growth potential in Indonesia’s increasingly digital customers.

Responding to Consumer Trends

To respond to consumer trends, banks must:

• Build new digital capabilities
• Make banking a part of customers’ daily lives
• Provide simple digital onramps for customers
• Invest in their financial education

Prioritizing Digitization Efforts

The shift towards digital banking in Indonesia will continue, with consumers increasingly open to digital channels. Banks should prioritize digitization efforts to attract new customers and build loyalty among existing ones.

By addressing the challenges and opportunities presented by digital banking in Indonesia, banks can capitalize on the growth potential of this rapidly evolving market.