Kaspar Situmorang shares how financial organisations can adapt using exponential technologies.

Kaspar Situmorang, digital enabler for Bank BRI and former Regional Program Manager at Silicon Valley's hardcore DNO specialist, has 13 years of demonstrated history in working at the software engineering, telco and banking industry and is equipped with strong product, program and project management.

He created BRI's two end-to-end digital lending, Pinang and Ceria, which accelerated loan origination to loan disbursement in just under 2 minutes, with the help of machine learning credit underwriting, digital signature, and face recognition.

Kaspar also started BRI's Big Data and Artificial Intelligence, BRIBrain and assembled BRI's Human Centered design team and created BRI's Design Ops to provide the best customer journey in the microfinance industry.

As one of the speakers in the recently concluded Utilising exponential technology for business' transformation webinar, Asian Banking & Finance spoke with Kaspar as he shared his thoughts on how industry players can adapt transformation using exponential technologies and provided key insights on his current initiatives that helps optimise the value of the finance function in their company.

What are the trends and shifts you have observed in Asia-Pacific’s finance and banking sector in recent months?
There are 5 technology trends that will affect the banking industry in at least the next 3 years: Open Application Programming Interface (API), Cloud, Customer Experience (CX), Digital Core Banking, and Robotic Process Automation/Artificial Intelligence (RPA/AI).

Open API has become more prevalent as the need to integrate financial services and applications are increasing. It opens up a way for banks to extend their services to more markets beyond the core products. It also triggers collaboration and partnership amongst financial institutions, creating an integrated digital ecosystem. Indonesia is ranked 11th amongst Asia Pacific countries with US$6 million spent on integration and orchestration middleware, but ranked first in CAGR with 25,3% indicating Indonesia’s market is heavily integrating and driven by ecosystem collaboration.

The second is the utilisation of physically serverless Cloud, equipped with various technology platforms and customisable options fit to the banking industry. In Indonesia, the usage of Cloud is accelerated since the pandemic caused a regulatory comfort to use cloud and public cloud vendors are emerging. In Asia Pacific, Indonesia ranked 13th in spending but ranked 2nd for its CAGR, indicating the rapid adoption of cloud.

Next is on the improvement of Customer Experience (CX). Banks are improving their CX by integrating customer data across applications, to provide a frictionless and personalised experience for each individual customer. Ideally, the CX system is backed up with cloud, big data analytics, and AI/ML. However, most Indonesian banks have not yet implemented CX fully.

Certainly, the pandemic has pushed everything to be done in a safe, fully-online manner, and driven further the adoption of contactless technologies and digital experiences. Customers also expect to interact with their banks digitally, through internet, mobile apps, to social media. Thus, the banks are improving their digital core banking to be more hyper-personalised, agile, and ultra-lean.

Lastly, as customers demand faster and frictionless services, banks are starting to utilise Robotic Process Automation (RPA), or leveraging artificial intelligence (AI) and machine learning (ML). The technology is used for automated decisions in authorisation or loan approval. However, AI/ML requires quality data to be effective and it becomes a challenge in Indonesia. We spent US$16.8 million on analytics and AI which placed us in 10th rank amongst Asia Pacific countries.
With the rapid development in these 5 technology trends, the banking industry is progressing with a more customer-centric, streamlined, and efficient approach to provide a frictionless and seamless digital banking experience for the customers.

How do you think industry players adapt transformation using exponential technologies? How can this benefit them?
The financial service industry is the most impacted by digital disruption. The pandemic surely pushed the industry to come up with new innovations and initiatives. The shift in trends showed that the consumer behavior has changed and demand for a more efficient yet seamless experience. In facing this disruption, we in BRI believe that the best defense is a good offense. Instead of trying hard to block the disruption attacks, we should leverage our core strength, adept the technology, join to disrupt and occupy the market.

Before adopting and mastering the technology, we have to develop and improve our capabilities. In BRI, as we started our digital transformation journey in 2017, we put a lot of investment to develop our capabilities. We adopt digital as our core company DNA, starting from transforming the company culture, ensuring that our talents are eligible and capable in mastering the technology.

BRI then upgraded our current capabilities, by improving the customer experience in our core business products: BRImo, our mobile banking application, BRILink Agent, and BRISPOT. We also integrate and utilise cloud, by using Google Cloud Platform as our Public Cloud, and Openstack for our Private Cloud. In improving our digital core banking, we partnered with Finacle to develop Indonesia’s first digital lending platform issued by a bank, named CERIA and Pinang.

In terms of open API, we became the pioneer of Indonesian open banking API with BRIAPI. BRIAPI paved the way for third-parties to integrate BRI products and services into their front-end applications within only 2 hours. Through BRIAPI, BRI managed to occupy the digital ecosystem in Indonesia, by being a partner for more than 200 companies, varying from fintech, marketplaces and e-commerce, ride-hailing, to universities, non-digital companies, and government.

Bank Rakyat Indonesia has built our own Big Data system named BRIBRAIN by utilising AI and machine learning since 2017, and have since managed to unlock more opportunities. As the world’s largest microfinance institution, we have unfair advantages in massive amounts of data, which our award-winning big data analytics team managed to optimise. BRIBRAIN mainly functions as data analysis, used to generate predictions and make data-driven and faster decisions. It enables us to derive new business insights and obtain an in-depth understanding of our customers.

The use of the exponential technology can help us create a customer profile, in order to understand their needs, behaviors, and empowers our business process. It will also bring insights on what to improve and what-nots, to provide simpler and more accessible solutions even for the underbanked or unbanked.

What challenges should industry players prepare for and how can they address these?
With the increase of digital banking amongst consumers, and the massive transaction behavior shift into mobile apps, the bank industry will make a prime target for hackers. Since digital banking has become more common, cybersecurity has become vital. According to a global outlook compiled by Deloitte in 2020, 71% of the bank leaders expect to increase cybersecurity spending, with cloud computing and data privacy become the main areas of improvement to avoid data breaches.

As EVP of Digital Banking Development and Operations, what are your current initiatives to optimise the value of the finance function in order to better position your company for the future?

Since the fintech industry grew exponentially in 2017, we took the opportunity to transform in digital and culture. We called this digital transformation journey as BRIVOLUTION. In BRIVOLUTION, we believe that the best defense is a good offense. Thus, BRI uses a bimodal approach in its Digital Transformation Strategy, where we use two different yet still coherent approaches, running at the same time. In our Exploitation approach, we digitise our core business processes as well as improving our existing products and services. Whilst in Exploration, we seek new opportunities, develop new innovations, and offer new initiatives to solve new problems.

In the Exploitation approach, we push efforts to boost productivity and unleash our potential by digitising every business process to support our core business. In 2018, we reworked and upgraded our mobile banking app, BRImo, into a SuperApp. We implemented e-KYC, facial recognition, and digital signature features, enabling customers to open new savings accounts from their gadget, without the need to come to our branch offices.

We also digitise the process and function for our BRILink Agents. BRILink is a branchless banking initiative that empowers individuals and MSME to act as BRILink Agents. BRILink aims to boost financial inclusion to the remote areas, presenting BRI products and services without having to open a branch office.

In our Exploration approach, we built the ecosystem to offer products and services beyond our core business. We became the pioneer of Indonesia’s open banking API system by creating BRIAPI. In the integration process, we never compromise on the data security issue. BRIAPI is the first in Southeast Asia to earn the Payment Application Data Security System (PADSS) Certification from the PCI Council, as well as the first in Indonesia to be certified ISO:27001. Those are the highest certification in the world that guarantees the quality of data security in a payment system.

We also developed the first digital lending application, issued by a bank in Indonesia, that we called Ceria. Ceria is a mobile-first, self-service, end-to-end digital micro-financing product that enables us to present consumer loans to the nation’s unbanked population.

We use BRIBRAIN to empower our digital products and services. Through BRIBRAIN, BRI now is able to store, process and consolidate information from multiple data streams in a single platform.This new stack empowers BRI’s new enhanced digital products and services whilst allowing for more efficient operations. BRIBRAIN helped us unlock more customer opportunities by accelerating the process of merchant assessment, fraud detection, to credit scoring.

In merchant assessment, BRIBRAIN is able to detect potential customers that can be acquired into BRILink agents, give the performance score of a BRILink Agent, and provide score customers loyalty towards a specified BRI merchant. BRIlink teams were able to locate the ideal individual to recruit as a BRILink agent which would both expand and optimise the network’s reach whilst improving accessibility for customers.

BRIBRAIN is also able to detect potential fraud by leveraging customer savings, loan transactions, deposits, payroll and other financial data, creating a behavioural scoring model for fraud. Real time detection was enabled by utilising HBase as the model’s backend data store, enabling operators to process and highlight anomalies found in the stream of events coming from multiple customer touch points – such as ATMs, EDCs and internet banking portals. This function then helped us in mitigating the ATM Skimming Fraud which impacted us.

BRIBRAIN also plays a vital role in analysing customer transaction data and providing credit scoring. BRI’s credit analysts could predict the probability of customers defaulting on payments in the following month. The system would highlight these at-risk customers, prompting loan officers to visit them to reduce the likelihood of net profit loss. We integrated this function into Ceria, which manages to automate the process and cut the loan disbursement time from two weeks into two minutes, making BRI to have the fastest credit approval. Ceria also became the first Indonesian Digital Lending App certified ISO:20000 that can simplify the loan process by self service.
For all these breakthrough innovations, BRIBRAIN has become the world’s largest neural network in the microfinance sector, and the only bank in Indonesia to earn ISO:27001 for Big Data Analytics.

Despite the difficult time, BRI continues to thrive as the nation's largest bank that runs the world's most sustainable microfinance program, by implementing and innovating with exponential technology. We aim to always be the first in accelerating digital transformation and national financial inclusion, backed up with the safest data security system certified internationally.