For many leading banks, digital innovation is an incremental challenge. At the top of the ladder the largest banks are under constant pressure to innovate and to retain or recapture the number one spot in their region or market. For those smaller banks, it can often be easier to adopt a “wait and see” policy. By letting other banks spend the money on expensive R&D, more niche institutions can pick and choose from a buffet of proven digital tools, and ensure that their entire digital bank experience is tailored to the needs of their specific customers.
This is the fascinating position Andi Kartiko Utomo, the former VP for Digital Payments & Banking at Telkomsel, finds himself in. He has been drafted in to run E-Banking and Non-Traditional Channels at PT Bank QNB Indonesia, and we were lucky enough to catch up with him recently to ask him for his thoughts on digital banking and the fintech revolution:
What is the greatest challenge when building a digital bank from the ground up?
Banks still don’t have a clear picture of what’s digital banks looks like. What’s the difference with branchless banking? What’s the end of digital bank game? What’s the impact to risk management? How can regulators anticipate this? No bank in the world has claimed to be successful in digital banking, even though we have been talking about this since early 2010.
What lessons have you taken from your work at Telkomsel into the banking industry?
Telco are desperate to transform from their dying legacy business to digital one. They don’t want just to be a ‘dump-pipe’, they want to be a real player in digital, despite the massive attack of OTT players over their network. One of their big initiatives are financial services. Telcos believe they can be a successful player in the mobile payment space. Having said that, currently no company is making money out of it, and so we should ask whether it is just a play for ‘defensive value’.
How can digital banking initiatives help the quest for financial inclusion?
In many cases we should think of bank inclusion, rather than ‘financial inclusion’. Millions of people who are under-banked in Indonesia have access to financial services (both formal or informal). However, given their legacy paradigm, banks will never make money to reach those segments, and they therefore need collaboration with networks and customer owners. One of those are the Telcos.
From a bankers perspective, what is your opinion of the growing interest in fintech?
Bankers are constantly saying that fintechs will never replace banks. One of the big things about banks’ capabilities is the gathering of funds from the people and that is regulated by Central bank. But, what if fintech able to gather funds from the ‘big fish’ investors? And from there lend it with very low interest, below the banks’ rate? The banks’ big hole is expenses and the cost of money. I think in this way we can see that banks are set to face increasingly challenging competition in the coming years.
Andi will be joining us at Future Bank Asia on 21st April to discuss building a digital bank from the ground up. To find out more about the event, and to discover how you can be there, download the brochure here.