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Digital banking Indonesia | McKinsey

Indonesian consumers are embracing digital banking. To attract them, banks need to take an active approach.;


Digital technology will continue to transform the banking landscape in Indonesia. Our latest survey of financial services customers in the country shows 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.

To understand the dynamics of the personal financial sector, in 2017 McKinsey surveyed 900 consumers of financial services across Indonesia on their banking habits—part of a broader survey of approximately 17,000 personal finance consumers in 15 Asian markets

The Indonesia research shows a continuation of the shift to digital channels observed in the 2014 version of the survey. Digital penetration is 1.6 times the 2014 rate, and has now reached 58 percent, in line with the rest of Emerging Asia.

Several factors combined to accelerate the migration to digital channels in Indonesia. In addition to the rapidly increasing adoption of the internet and smartphones, and growth in e-commerce, a strong digitization push by Indonesian banks has stimulated demand. Banks’ efforts to encourage customers and explain online banking were the most frequently cited reason respondents gave for trying digital channels.

Three trends shaping retail banking in Indonesia

We believe three trends—the diversification of banking relationships, the increasing receptiveness of consumers to digital propositions, and the increasing value of digitally active

1. Diversifying banking relationships

Indonesia’s banks—as well as their peers in the rest of Emerging Asia—trail Developed Asia’s banks in product penetration. While this figure has grown from an average of 2.2 products in 2014 to 2.7 in the recent Indonesia survey, it is still well behind the 5.7 average for Developed Asia. At the same time, the number of banking relationships per customer is growing, albeit still trailing Developed Asia as well. We believe these figures will increase as Indonesia’s economy continues to grow and customers mature financially. This increase in product penetration will represent a significant growth opportunity, but will also draw intense interest and competition from fintech online courses attackers. Indonesian banks will need to take swift action to address decreasing customer loyalty.

2. High level of openness to digital banking propositions

Indonesian consumers are very open to digital banking. Over the past three years, monthly usage of digital banking channels in Indonesia has grown twice as fast as other Emerging Asian markets. Furthermore, 55 percent of nondigital customers said they were likely to use digital banking in the next six months; this is the second-highest figure for any country in Emerging Asia, after Myanmar (Exhibit 1).


Indonesian banking customers are among Emerging Asia's most enthusiastic adopters of digital banking.;

The survey also points to an opportunity for purely digital players: about 50 percent of all respondents would consider shifting to a bank without any physical presence, and a majority of those respondents expressed confidence that they would shift 25 to 50 percent of their balance to a pure digital bank.

Despite the strong openness to digital banking, branches will continue to be relevant in Indonesia. About four in five respondents cited convenient branch and ATM locations as a reason for choosing a bank. In addition, digital transactions remain limited mostly to simple services and products as consumers cite security concerns and difficulties in understanding more complex offerings. Branch access as part of a multichannel offering could address such worries.


3. Digitally active consumers are more valuable

The percentage of Indonesia’s banking consumers that are digitally active has grown 2.5 times since 2014, and they now comprise 32 percent of the banked population. This growth becomes even more significant in light of the fact that digitally active consumers are more valuable in an economic sense to banks. Two metrics from our research underscore why this segment will be so important for Indonesian banks seeking growth:

Loyalty: Digitally active consumers are twice as loyal as nondigital consumers.

Purchase activity: Digitally active consumers bought twice as many banking products in 2017 compared to nondigital consumers, and currently own 1.5 times more products than nondigital peers (Exhibit 2).


Digitally active customers in Indonesia purchase more banking products than other customers.;

Responding to consumer trends

The rapid shift towards digital banking in Indonesia presents opportunities for both incumbents and attackers to enhance customer engagement and add value:…

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