INTERVIEW
Bank Central Asia’s senior EVP reveals the digital challenges faced by Indonesian banks Hermawan Thendean also talks about how BCA opened its APIs to a community of web developers.
H
ermawan 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 venter, 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 the bank’s IT strategic direction and transformation. How is the Indonesian banking sector affected by the big push for digitalisation in the financial services industry? First, around 50% of Indonesia’s population is between 1550 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 fintech 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 Talking to agents has been replaced by chatbots using AI (Artificial Intelligence) or Machine Learning.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 about your most recent digital initiatives. 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 by collaborations between banks and fintech companies and 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 three — and we know exactly what APIs they need.
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 do you consider as your biggest achievement so far at Bank Central Asia? I decided to make my organisation 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 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 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 made my people more engaged, motivated, and valuable to the company. How has the bank 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 (US$11.8b) to IDR215t (US$16.2b). The volume of transactions using internet has increased from 386 million to 476 million, with the corresponding value increasing from IDR1,586t (US$120b) to IDR1,762t (US$133b). ASIAN BANKING AND FINANCE | December 2017 41