RETAIL BANKING | Staff Reporter, Indonesia

Bank Central Asia's senior EVP talks about the digital challenges faced by Indonesian banks

Hermawan Thendean also revealed how BCA opened its APIs to a community of web developers.

Hermawan Thendean has more than 30 years of experience in the IT industry. He started his career as a Programmer Analyst, and then went on to work as an IT Project Manager, Group Head of Application Department, Group Head of Network and IT Operation Center, completing a full cycle in IT organisational structures. Currently, he is a Senior Executive Vice President in PT Bank Central Asia Tbk based in Jakarta, responsible for defining the bank’s IT strategic direction and transformation.

In this exclusive interview with Asian Banking and Finance, Thendean discusses the digital challenges in Indonesia and more.

How is the Indonesian banking sector affected by the big push for digitalisation in the financial services industry?
The Indonesian banking sector is absolutely affected. Let’s take a look at these numbers. First, around 50% of Indonesia’s population is between 15-50 years old. Second, Indonesia is considered to be the third largest smartphone market in Asia Pacific, and that number is expected to grow from 56 million to 92 million in 2019 due to continued price drops in smartphone devices. Third, nearly 50% of Indonesia is expected to be connected to the Internet through smartphones when the government’s Palapa Ring project is completed. 

The project will provide fast broadband internet to Indonesians in both urban and rural areas. All these facts showed us that Indonesia is enjoying “online experience” where everything can be done conveniently through the Internet, anytime, anywhere. They can order food, hail a taxi, and buy things through their smartphone. So if the restaurant, grocery store, taxi company, and others do not innovate digitally, they will get left behind — including banks.

At the same time, more companies offer similar banking services at a much lower price. So the banking landscape in Indonesia is changing now. Most banks, especially big ones, will have to digitally transform to better serve their customers. Most banking services will go through digital transformation and we can already see several banks offer their digital banking products. Physical branches have also changed, with banks showing off their entire digital products and services.

There will be less tellers or customer officers in physical branches. Talking to agents has been replaced by chatbots using AI (Artificial Intelligence) or Machine Learning. Just like what we have done lately by introducing VIRA (Virtual Assistant) to the market, where a machine answers our customers’ queries.

Please tell us a little bit about your most recent initiatives around digital banking?
We recently opened up our APIs to a community of web developers to build all of the services a consumer might want in the digital world. For the first phase, we have opened up a good number of APIs — we are developing some more and it will be available soon. This is going to be our future open banking model, because we believe that the future of banking will depend on open APIs.

Currently, fintech companies are offering better services and earning better customer experience than traditional banks whilst banks still have better access to greater capital, customer base, and better knowledge on regulations and security.

We believe that collaborations between banks and fintech companies by taking advantage of APIs, we can complement each other to significantly enhance our customers’ experience than if we do it separately. In the end, by leveraging open API, banks can grow its customer base as it will add various third parties to personalise and customise its products and services.

What are the challenges you encountered in rolling out these initiatives? What are the results?
We do not know exactly what APIs our customers need. Of course, we will not turn our entire core banking system into APIs, we need to understand what we wish to sell and expose. So, we have created and promoted several APIs that we think meet our customers’ need. We have held some events for our API users from many developers and fintechs.

The event was organised to promote our APIs and have a better understanding of what developers or fintech customers are asking for. From that event, we have learned that developers who use our APIs don't limit themselves to one — on average they are using 3 — and we know exactly what APIs they need.

What do you consider as your biggest achievement so far as the senior executive vice president at Bank Central Asia?
I decided to make my organisation to be more engaging and valuable. I have presented my idea to the directors’ committee and they have given me the go-ahead. So I started by analysing all the evaluations over the past few years to understand what people found valuable and where were we are losing them.

As a result, I was able to change our working environment to become more open and attractive. I changed the way we dress up for work, from wearing formal attire into casual. I also added flexible working hours that really encouraged people to stay and work at their best time. I am very proud of the fact that this new environment make my people more engaged, motivated, and valuable to the company.

How has the company progressed under your leadership?
Our electronic transaction has increased 15%-18% annually. Only 3% of our transactions happen in physical branches and the rest happen through digital. Compared to last year, transactions on mobile banking has increased significantly from 171 million transactions to 244.8 million where the value has increased from IDR157t to IDR215t. Volume of transactions using internet has increased from 386 million to 476 million and value from IDR1,586t to IDR1,762t.

What are your key business philosophies?
One needs to stay focused and persistent on the mission because it is the core of achievement. I noticed that all successful people who have achieved great things in their lifetime did so through persistence. They never give up. Even when they failed, they got back up and kept on doing.

The company I work for, BCA, is considered as very successful in the payments business. It is neither because of the technology nor the best people we have. This is because of our persistent focus on our payments business until now. Three decades ago, we focused on the payments business. Today we remain focused on it, and the next years, we will continued doing the same. Because we focus on the payment business, we will survive for a long time.

What three goals are you focused on in the next 12 months?
1. Develop a data science team and programme to answer the challenge of becoming more data driven. Leveraging data in every decision.
2. Innovate with new technologies, as IT innovation is part of our business priorities.
3. Improve automation process. Many digital transformation programmes require an increase in process automation to meet customer expectation for everything to be in real-time, not just transaction but reporting as well.

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