Everything will be digital, this is the

future of Indonesian banking

Jakarta, CNBC Indonesia – The term ‘digital bank’ has become a hot topic of conversation this year. This narrative even caused the share prices of mini banks (with core capital under IDR 5 trillion) that wanted to go digital to soar high, being bought up by Indonesian capital market investors.

If you look at the broader picture, the impact of the industrial revolution 4.0 which marks digital transformation – with disruptive technologies such as artificial intelligence, cloud computing, blockchain, and even biometrics – is currently affecting the banking business.

One of the most obvious impacts is the use of data to improve product quality. The term “data is the new oil”, which was introduced by British mathematician and data science businessman Clive Humby in 2006, still finds its echo today.

This means that data processed by certain computer programming systems (big data analysis, for example) can be considered the new oil for today’s digital/internet economy.

In the banking context, data exchange will become increasingly common along with the development of open banking by utilizing API ( Application Programming Interface) technology. In simple terms, API technology is an interface (interface, visual display) in software that can connect applications to one another.

In short, in the future, data can be used as a bank asset to develop a kind of predictive analysis in an effort to improve financial products and services.

Apart from data use, the impact of the industrial revolution 4.0 on banking also includes changes in consumer expectations, new types of partnerships or collaborations with the digital economic ecosystem, and changes in business models and technology.

Along with the development of digital technology in the era of industrial revolution 4.0, the Covid-19 outbreak which started last year has helped accelerate the digital transformation of banking.

The Corona virus pandemic, which is accompanied by restrictions on people’s mobilization or physical activity, forces people to adapt and slowly carry out economic transactions via online or digital platforms.

Referring to Inventure data (2020), which is quoted in the recently published Financial Services Authority (OJK) Digital Banking Transformation Blueprint book, one of the visible impacts is changes in banking transactions during the pandemic.

Transactions that were initially mostly carried out at branch offices are now carried out digitally or online via mobile banking, internet banking, or call centers driven by artificial intelligence.

Then, pagebluk also encourages consumers to reduce cash transactions.

According to OJK records, before the pandemic, the transaction trend towards cashless transactions or non-cash transactions was already increasing. However, the Covid-19 pandemic accelerated this process for the reason of reducing the potential for virus transmission.

This can be seen from the trend of increasing use of digital banking services during the Covid-19 pandemic. ( Graph below ).

Seeing the digitalization trend phenomenon above, OJK finally published the Banking Digital Transformation Blueprint at the end of October 2021.

The blueprint focuses on 5 main elements that will provide digitalization policies for banking, namely guidelines for implementing data, technology, risk management, collaboration and institutional order in the banking industry.

Currently we are witnessing a transition from traditional banking–which is reflected in one of the vertically integrated, asset-heavy, rigid value chains–to new-age banks, which are truly digitally integrated and open-based. platforms.

Quoting OJK, in this case, new era banks or digital banks are characterized by a lean and agile organizational structure and have more advanced digital capabilities (advanced digital capabilities).

Then, a leaner and more agile organizational structure places greater emphasis on collaboration and integration with other parties, such as having a large, consumer-oriented marketplace community.

Furthermore, advanced digital capabilities emphasize the use of updated and agile technology with high scalability, as well as data-based business models with simple and automated processes based on an open platform.

So, what are the real prospects and opportunities for banking in the future era of digitalization?

Source : CNBC INDONESIA