BRI Strives for Digital Bank

BRI appears to pursue similar innovation as some Indonesian banks to form a digital bank. Previously, as quoted by Katadata, BRI's President Director Sunarso had said that the company is open for the possibility to convert its subsidiary into a digital bank.

There are two BRI subsidiaries engaged in the banking business, BRI Agroniaga Tbk (Agro) and BRI Syariah. Sunarso said that it is impossible for BRI Syariah to be converted into a digital bank. "However, BRI Agroniaga is very possible," he said.

In contact with DailySocial, BRI's Director of Digital, Information Technology and Operations Indra Utoyo also confirmed this. He said that the company is finalizing its current concepts and strategies. "Yes, it's quite the truth [being a digital bank]," he said through a short message.

BRI Agro has quite a potential to be converted, considering that the company has launched the digital lending platform Pinang (Pinjam Tenang). However, he said BRI Agro was not directly merged into a digital bank because as the parent company, BRI wanted to have trial on the market.

"[The first approach] through Pinang as a use case for digital attackers. Currently, Pinang is the only fully digital loan solution from the banking sector," he said.

As a general note, Pinang is a digital lending platform released in early 2019 by BRI Agro. Apart from working capital, Pinang can be used for a variety of services from tuition fees to medical expenses, also daily needs. Based on the 2019 Annual Report, BRI Agro recorded Pinang's credit disbursements had reached IDR 30.6 billion with a total of 7,331 debtors.

Pinang is also BRI's new business model which refers to the new digital banking proposition strategy. This service is the first digital loan platform in Indonesia that offers e-KYC with digital verification, digital scoring, and digital signature systems.

Furthermore, Indra said that the company's next digital strategy is to continue to engage with BRI Group's identity targeting the micro and Small and Medium Enterprises (SME) segments.

"Regarding Bank Agro's new position, there will be an answer at the right time. We cannot answer now [whether there will be new digital products aside from Pinang]. However, our digital strategy stays with go smaller, go shorter, and go faster. This means we'll be entering a smaller segment, the ultra micro," said Indra.

Last time, Indra said digital banks will be quite optimal when it's combined the physical networks, not only digital services. Therefore, he considers there is no need for a dichotomy between digital and non-digital banks, considering that BRI has so far provided more value than this concept through its products.

The realization and its challenges

Until the end of this year, there are at least two digital bank initiatives awaiting realization. Bank Digital BCA and Bank Jago (previously Bank Artos) are to launch in the second semester of 2020.

Bank Digital BCA will become the new branding of its previous name, Bank Royal. The target market involves retail and SME segments, different from its main portfolio which mostly corporates.

Meanwhile, Bank Jago will target the middle and mass-market segments as the main target. The company will also collaborate with digital platforms in various business verticals, such as e-commerce, ride-hailing, and p2p lending.

Meanwhile, PT Bank Yudha Bhakti (BYB) officially changed its new name to PT Bank Neo Commerce Tbk through the Extraordinary General Meeting of Shareholders (EGMS) on July 30, 2020.

Bank Yudha Bakti's President Director, Tjandra Gunawan said that changing the company's new name is part of the business and digital transformation strategies for the 2020-2022 period.

Institute for Development of Economics (Indef) observer Bhima Yudistira, assesses that the realization of a digital bank will have a big impact on Indonesian people, especially those who are yet to have access to financial products or underbank.

However, the digital banks will require market education in various circles, for example, SMEs and rural areas. "The importance of developing a digital bank here must be accompanied by additional internet network access to remote and outermost areas," Bhima said.

– Original article is in Indonesian, translated by Kristin Siagian