Thursday, 18 July 2024

BCA’s Setiaatmadja: “Accelerating digital strategy vital to growing customer base and business stability”

5 min read

By Foo Boon Ping

The president director of Bank Central Asia (BCA), Jahja Setiaatmadja, talks about how accelerating the bank’s digital transformation has helped in expanding customer engagement and how the financial services industry will play out during the current crisis brought about by COVID-19

  • Continuous expansion in digital capabilities is key to growing customer base and ecosystem
  • Customer engagement surged as a result of strategic digitalisation initiatives
  • Adopting conservative measures and sustaining ample liquidity as buffer for unforeseen events

Despite the headwinds triggered by the extraordinary disruption caused by the COVID-19 pandemic, Bank Central Asia (BCA) has continued to evolve its digital transformation to bring about expanded customer experience and tap market opportunities.

Jahja Setiaatmadja, the bank’s longtime president director, tells us that BCA has committed to growing its digital potentials to adapt to customer behaviour and position itself as a leader in digital based financial services.

Setiaatmadja is currently leading the bank in digitising its processes by focusing on enhancing their digital platforms such as internet and mobile banking to meet ever-changing customer needs and to stay abreast of the competition.

BCA’s initiatives resulted in a 72% increase in the number of accounts opened online to 6,950 transactions a day in the second quarter 2020 from 4,041 transactions a day in the first quarter of the year. The number of current and savings account (CASA) opened also grew steadily to 13% year on year (YoY) and 8.3% year to date (YtD) to IDR586 trillion ($39.75 billion) in the first half of 2020. Account balance also rose to 18% from the pre-pandemic times.

Setiaatmadja credits the significant increase in the bank’s digital banking transactions to key technological investments and its ability to turn market disruptions into opportunities.

BCA, Indonesia’s largest private bank, is also Southeast Asia’s largest lender by value with a market capitalisation of IDR789.58 trillion ($52.9 billion).


The following is the edited transcript of the interview:

Foo Boon Ping (FBP): Digital banking is transforming the financial services landscape in Asia with neobanks and big tech challenging the traditional banks. In your opinion, where do you think the future is headed for banks like yourself? What is the one key opportunity and challenge that your bank faces in this age of digital innovation and disruption?

Jahja Setiaatmadja (JS): With a strong footing as transaction banking player in Indonesia, Bank Central Asia (BCA) has been expanding its digital capabilities to respond to the changing customer behaviour and heading toward digital based financial service provider. In the past few months during the pandemic, we have seen the promising results of our digital investments. The number of customers and accounts has increased steadily, and so has current and savings account (CASA). By growing CASA which entails lower cost of funds, we have the luxury to opt for good quality assets.

Time is of the essence when tapping market opportunities. We have to be agile, to learn from the market swiftly, and see what we can add more value to customers, hence turning ‘disruption’ or ‘challenge’ into ‘opportunity’. The pandemic itself could be seen as an opportunity to read market behavior in transacting as BCA is now connected to wider ecosystem compared to pre-pandemic period. BCA is a key partner for payment and settlement transactions for e-commerce and fintech players. Going forward, we expect cashless and cardless transactions to be a significant part of the ‘new normal’. Furthermore, Indonesia’s young demographic also gives the benefit of embracing digital era in a faster way and be of help in educating the more senior generation when using digital channel. Once conveniently used, the chance of more people embracing digitalisation is wide open, and we see this as an opportunity to tap.

Support from the government and regulators have been tremendous during this difficult time. The banking industry is witnessing how the global health crisis has spurred customers to embrace digital services, forcing banks like BCA to catch up digitalisation at an unprecedented pace. With the rising number of online transactions, BCA has to continuously complement digital functionality with IT security systems to mitigate the potential cybercrime attacks. Investments in digital is also expensive and have to be continuous.

Expanding digital capabilities is key to growing customer base and ecosystem

FBP: What is your key strategy to succeed and the key priority pillars that support the strategy? What is your vision for your bank in toward its journey of "reinvention"?

JS: BCA’s journey as transactional bank began with building critical mass for its payment systems and offering customer convenience as the added value. BCA has to be within the top three payment options for both individual and business purposes. We believe that generally every individual would need only two payment banks for transactions, while a company would be convenient by having maximum three to four main payment accounts. Fast forward, customer loyalty has proven that our strategy works and our achievements today suggested that continuous expansion in digital capabilities is vital especially in growing low cost funds of CASA, and particularly is aligned with the changing customer behaviour towards digital. This holds true especially during the pandemic when mobility is restricted and people become more dependent on their mobile devices.

BCA’s competitive edge is in growing customer base and enriching customer experience through expanded ecosystem.

BCA mobile banking and internet banking have been our key channels to remain ahead of our peers. We are among the country’s pioneers to launch internet banking in early 2000s and mobile banking in 2006. We have introduced application programming interface (API) back in 2017, connecting to major fintech and e-commerce players. Our online account opening facility which was launched in April 2019 has garnered 38% contribution of growth in the number of accounts opened during the first half of 2020.

Going forward we see that digitalisation has greater opportunity to be permanent in some areas of ‘new normal.’ Continued feature enhancements in our digital platforms such as internet banking and mobile banking are required to meet ever-changing customer needs that shift toward cashless, cardless and contactless culture.

Acceleration of digital strategy, such as moving toward open banking platform is pivotal to grow our customer base including merchants and to create banking experience. Relentless efforts are in place to ensure convenient and secured transactions supported by system stability.

FBP: What are your views about a cloud and open architecture based platform as a service (PaaS) core banking infrastructure platform that support APIs and microservices?

JS: We embrace open platform/open architecture and cloud-based infrastructure. Cloud services offer cost and space efficiency in addition to more data capacity. However, the implementation shall be within the regulator’s guidelines.

Digitalisation boosted customer online transactions

FBP: What are the key digital initiatives that you have launched and talk through the background/context to why you started them and what you have achieved? What role is technology playing in the reinvention of the bank? Can you give us some examples of technologies in use and how they're supporting this?

JS: Online account opening through mobile banking was introduced in April 2019 and the results have been encouraging. During the pandemic, the peak number of account opened online surged by 72% on quarter to 6,950/day in second quarter of 2020 (2Q 2020) from 4,041/day in the first quarter of the year. Account balance also increased by 18% from pre-COVID period. New online account opening contribution to total new account was 38% year on year (YoY) June 2020.

BCA now processed 31 million transactions/day rose 26% YoY in first half of 2020 (1H 2020). Robust mobile banking use in the first semester also booked 73% YoY increase. Combined mobile and internet banking transaction numbers grew ~51% YoY. Mobile and internet banking transaction value contributed 47% of total transactions, outperformed branch banking of 45% contribution. Mobile banking number of transactions increase was boosted by transfer transaction (up 88% YoY) and virtual account (rose 51%).

FBP: How have they impacted your customers, your internal organisation and financial performance?

JS: CASA growth which can be a reflection of customer trust in using our digital platform also recorded an increase of 13% YoY and 8.3% year to date (YtD) to IDR586 trillion ($39.75 billion) in the first half of 2020, supported by savings account.

We achieved BSQ (Bank Service Quality) index score of 4.86 from scale 1 to 5. HALO BCA call centre has resolved 99.84% of filed complaints last year, and continues to play an important role in our digital campaigns.

FBP: With reinvention comes risks and failures, could you talk about the risks and failures that you have experienced in your career and how they have changed you and the institution(s) that you lead? What’s one professional risk you’re proud of taking? How are you teaching people at your bank about risks and failures?

JS: We believe that there is no success stories without invention or re-invention. We launch a new product only after we study market or customer behaviour. As a transactional bank, BCA has the luxury of being able to observe customer operating accounts and develop potential products in the market and finally let the market decide.

Everything comes with risks, but we can say that it is always a learning process and therefore has lessons learned to keep moving on and growing endlessly.

Conservative measures and sustaining liquidity as safeguard

FBP: What are your personal aspirations for the new year? What personal advice do you have for people wanting to follow your footsteps?

JS: The impact of economic headwinds caused by the pandemic which is translated into pressured asset quality and profitability is likely to linger until next year. Particularly for Indonesia banking sector, the true asset quality condition will emerge once the loan moratorium period ends in March 2021, if not extended.

Given such uncertainties, adopting conservative measures will be in our agenda while at the same time sustaining ample liquidity as the buffer for any unforeseen events.

FBP: What is your personal assessment of how this crisis will play out and the outlook for the industry?

JS: This crisis is different from the Asian financial crisis in 1997 and the global financial crisis in 2008. The 1997 crisis was a combination of political turmoil with public distrust in the banking system, while the 2008 crisis only lasted for a short cycle. Today Indonesia banking systems are more prudent and we have seen government initiatives to protect the economy.

Observing the recent digital trends especially during the current pandemic, banking industry will change towards open banking, that is, more collaboration with non-banks financial service providers such as e-commerce and fintech players. IT role will be more important especially in the area of data analytics and cyber security.

Margin will be in downward trend affected by lower interest rate environment and loan restructuring which postpone interest income recognition.

Asset quality to worsen as economic growth trending down and recovery trajectory is still very fluid. Periodic review are required to obtain a better view of debtor recovery capabilities especially after the relaxation period ends.

Having ample liquidity is a must to anticipate uncertain conditions. Forced merger/consolidation might be on the table for banks with limited buffer on liquidity, asset quality and capital.

The good news is that the government and regulators have been very supportive to the industry. A series of stimulus were launched to address the challenges in the economy, health and financial sector which include loan restructuring relaxation.

FBP: How exactly is the banking industry in the region being affected in your view?

JS: Banking sector is a proxy of economy, any economy downturn will cause banks to slow down while credit risk is increasing.

FBP: Would you say that your bank is “ready” for this crisis, and if so how?

No one is prepared for this COVID-19 crisis. What we are focusing on now is to prioritise the safety of our staff and optimise convenient services within our large ecosystem. During the pandemic, we introduced among others #Bankingfromhome campaign, Payment Link, QRIS feature enhancements for ease of transactions. On the lending front, we pay more attention on credit restructuring and monitoring to see debtor recovery capabilities. As always, BCA will stand by our customers to go through this challenging time and uphold customer satisfaction and loyalty in the long run.

FBP: What were some of your bank’s first line responses to the crisis (both for customers as well as to staff)?

JS: BCA ensures the adherence to health protocols as the safety of our customers and staff comes first. Various measures are taken such as working from home, virtual meetings, provision of health necessities (sanitisers, surgical masks, body temperature checks, etc,).

For the community, through BaktiBCA programs, we provide assistance in the form of masks, APD (personal protective equipment), ventilators and foods.

FBP: How do you think this crisis will change your bank and the industry in the long term?

JS: It is too early to talk about the long term because we do not know how long the crisis will last.

Keywords: Digitalisation, Mobile Banking, Open Banking, Neobank, Cashless, Cashless Payment, Covid-19
Institution: Bank Central Asia
Country: Indonesia
Region: Southeast Asia
People: Jahja Setiaatmadja
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