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Indonesia: Building
loyalty and generating
growth
Authored by:
Sonia Barquin
Guillaume de Gantès
Vinayak HV
Duhita Shrikhande
Digital banking in Indonesia:
Building loyalty and generating
growth
Digital technology will continue to transform the the increasing value of digitally active consum-
banking landscape in Indonesia. Our latest survey ers—will continue to shape Indonesia’s retail
of financial services customers in the country banking sector.
shows considerable growth in the adoption of
internet and mobile banking, indicating that digital 1. Diversifying banking relationships
channels will become increasingly crucial in build- Indonesia’s banks—as well as their peers in the
ing loyalty and generating growth for financial rest of Emerging Asia—trail Developed Asia’s
institutions. banks in product penetration. While this figure
has grown from an average of 2.2 products in
To understand the dynamics of the personal 2014 to 2.7 in the recent Indonesia survey, it is
financial sector, in 2017 McKinsey surveyed still well behind the 5.7 average for Developed
900 consumers of financial services across Indo- Asia. At the same time, the number of banking
nesia on their banking habits—part of a broader relationships per customer is growing, albeit still
survey1 of approximately 17,000 personal finance trailing Developed Asia as well. We believe these
consumers in 15 Asian markets2 that builds on figures will increase as Indonesia’s economy
research that began in 1998. continues to grow and customers mature finan-
cially. This increase in product penetration will
The Indonesia research shows a continuation represent a significant growth opportunity, but will
of the shift to digital channels observed in the also draw intense interest and competition from
2014 version of the survey. Digital penetration is fintech attackers. Indonesian banks will need to
1.6 times the 2014 rate, and has now reached take swift action to address decreasing cus-
58 percent, in line with the rest of Emerging Asia. tomer loyalty.
Several factors combined to accelerate the 2. High level of openness to digital banking
migration to digital channels in Indonesia. In propositions
addition to the rapidly increasing adoption of the Indonesian consumers are very open to digital
internet and smartphones, and growth in e-com- banking. Over the past three years, monthly
merce, a strong digitization push by Indonesian usage of digital banking channels in Indonesia
banks has stimulated demand. Banks’ efforts to has grown twice as fast as other Emerging Asian
encourage customers and explain online banking markets. Furthermore, 55 percent of nondigital
were the most frequently cited reason respon- customers said they were likely to use digital
dents gave for trying digital channels. banking in the next six months; this is the sec-
ond-highest figure for any country in Emerging
Three trends shaping retail banking in Indonesia
Asia, after Myanmar (Exhibit 1, next page).
We believe three trends—the diversification of
banking relationships, the increasing receptive- The survey also points to an opportunity for
ness of consumers to digital propositions, and purely digital players: about 50 percent of all
Sonia Barquin, Vinayak HV, and Duhita Shrikhande, “Asia’s digital banking race: Giving customers what they want,” April 2018,
1
McKinsey.com.
For our analysis, Developed Asia comprised Australia, Hong Kong, Japan, Singapore, South Korea and Taiwan. Emerging Asia
2
comprised China, India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
China
India
Indonesia
Philippines
Vietnam
Thailand
Malaysia
Myanmar
Note: N=555 for China; 1,512 for India; 339 for Indonesia, 589 for Philippines; 320 for Vietnam; 318 for Thailand; 216 for Malaysia;
and 598 for Myanmar.
1
Digital banking usage or penetration refers to respondents who say “yes” to either using internet banking via PC or via smart-
phone. Includes respondents who are highly likely and somewhat likely to use digital banking in next 6 months
Source: McKinsey Asia PFS survey 2017
respondents would consider shifting to a bank About four in five respondents cited convenient
without any physical presence, and a majority of branch and ATM locations as a reason for choos-
those respondents expressed confidence that ing a bank. In addition, digital transactions remain
they would shift 25 to 50 percent of their balance limited mostly to simple services and products as
to a pure digital bank. consumers cite security concerns and difficulties
in understanding more complex offerings. Branch
Despite the strong openness to digital banking, access as part of a multichannel offering could
branches will continue to be relevant in Indonesia. address such worries.
Nondigital
customers 0.7 2.2
Moderately
digital 0.7 2.9
customers
Digitally
active 1.4 3.2
customers
Note: N=381 for nondigital; 236 for moderately digital; and 288 for digitally active.
Source: McKinsey Asia PFS survey 2017
3. Digitally active consumers are more valuable 2017 compared to nondigital consumers, and
The percentage of Indonesia’s banking consum- currently own 1.5 times more products than non-
ers that are digitally active3 has grown 2.5 times digital peers (Exhibit 2).
since 2014, and they now comprise 32 percent
of the banked population. This growth becomes Responding to consumer trends
even more significant in light of the fact that The rapid shift towards digital banking in Indone-
digitally active consumers are more valuable in an sia presents opportunities for both incumbents
economic sense to banks. Two metrics from our and attackers to enhance customer engagement
research underscore why this segment will be so and add value:
important for Indonesian banks seeking growth:
Building new digital capabilities
Loyalty: Digitally active consumers are twice as To capture the growth potential in Indonesia’s
loyal as nondigital consumers. increasingly digital customers, banks must invest
in new capabilities:
Purchase activity: Digitally active consumers
bought twice as many banking products in To keep up with the fast pace of change
in today’s banking landscape, banks must
3
Digitally active consumers use digital banking at least fortnightly and have made a recent online purchase. Moderately digital con-
sumers use digital banking but have not yet made an online purchase. Nondigital consumers do not use digital banking channels.
Sonia Barquin and Guillaume de Gantès are partners in McKinsey’s Jakarta office, Vinayak HV is a
partner in the Singapore office, and Duhita Shrikhande is a consultant in the Bangkok office.