Top 5 Trends in Consumer Banking in Indonesia

The reason that 80% of the Indonesians still have no bank account is not lack of access. The reason is lack of relevant products, services, and marketing from banks. Here are the top 5 trends in Indonesian financial behaviours that bankers need to heed in order to regain relevance within the market.

1. Indonesians have an affair with their ATMs

Research shows that 37.3% of all interactions between banks in Indonesia and their customers happen at the ATM. There’s nothing particularly unique about ATM features in the country. Indonesians just hate going to the bank. The country’s banking industry has one of the lowest recommendation scores in the region, and it’s not showing any signs of improvements. Indonesians have an affair with their ATMs not because they love the machines but because they hate their banks.

2. Indonesians are ready for (mobile) online banking

Almost 45% of urban Indonesians already use online channels to interact with their banks. Half of these interactions happen on desktops, the other on mobile. Unfortunately the online experience for most banks in Indonesia is still lacking. Go on KlikBCA, the online platform of BCA, one of Indonesia’s largest bank, and you’ll find that you can’t even save or print out an easy to understand account transaction history.

3. Indonesians love to get new financial products, just not with their current banks

While 80% of account holders have purchased a new financial product in the last year, more than 1/3 of these new accounts were at a different bank than their primary one. Customer loyalty is low but instead of improving customer experience, the more common strategy banks have adopted is to offer expensive prizes for every new accounts opened. Banks are focused on acquisition instead of retention.

4. Indonesians switch banks not because of enticing offers from competitors but because of bad experience with their current banks

The reason why over 58% of Indonesian banking customers are “switchers” is because banks have not really paid attention to them. Hidden fees and poor service have been sighted as the top reasons at to why customers leave their banks. These “push factors” are six times more important to Indonesians than any “pull factors” the competitors may have.

5. At least the priority customers are happy

Of all the different types of customers a bank may have, their most affluent seems to be the ones happiest with the bank’s services. The challenge is in increasing this standard level of service excellence to everyone.

The average margin for the country’s big banks is 7%—one of the highest in the world. This purely driven by basic supply and demand. There’s plenty of demand for credit, but limited supply. For now, banks can get a way with inefficiencies and shoddy customer service. However, this scenario will not last for long. With the coming AEC 2015, new players will enter the market and supply will become abundant. Those who use this last few months before AEC to improve customer loyalty and recommendation will be the ones coming up on top at the end.

TL;DR and just want the numbers? Here you go:

• Average margin for the country’s big banks is 7%—one of the highest in the world
• 80% of the Indonesians still have no bank account
• "Push factors" are cited to be 6 times more powerful than "pull factors" in causing people to switch banks
• 37.3% of all interactions between banks in Indonesia and their customers happen at the ATM
• 45% of urban Indonesians already use online channels to interact with their banks - half of them accessing via mobile
• 80% of account holders have purchased a new financial product in the last year - 1/3 of them got it from their primary bank's competitors
• 58% of Indonesian banking customers are “switchers”

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image courtesy of Wayan Vota