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Indonesia banks advised to explore varied offerings

Jack Loo | May 17, 2012
IDC’s Financial Insights recommends that banks embark on unique alternative banking models and revenue streams.

IDC's Financial Insights arm has advised banks in Indonesia to come up with varied offerings for different types of banking requirements, and avoid one-size-fits-all strategies.

"There is simply no one all-encompassing strategy that can accommodate Indonesia's growing financial maturity and the robust demand for product sophistication that it entails," said Michael Araneta, associate consulting and research director for IDC Asia/Pacific.

"Banks will have to become more focused on priority segments such as microfinance, private banking, SME banking, mass consumer banking, and so forth in order to succeed," he added.

Araneta was quoting key trends for a Financial Insights report, Business Strategy: Rethinking Indonesia's Financial Boom - A Banking Prognosis for 2012 and Beyond, which explores the competitive agenda of the nation's largest lenders, foreign banks, mid-tiers and regional development banks, and projects growth of IT spending in the industry until 2015.

Financial Insights said that Indonesia's banking sector's projected IT budget is expected to grow by 14.3 percent this year, half of which will be accounted for by the nation's 10 largest banks.

Mid-tier foreign institutions will in turn be responsible for 15.5 to 18 percent of sector-wide IT spending, closely followed by the country's 26 regional development banks at 14.5 percent. The remaining percentage will be attributed to Indonesia's numerous, yet fragmented, smaller lenders.

The investments to be made by the top 10 banks will be channelled to credit risk management solutions, core banking system upgrades, and IT infrastructure optimisation that will support aggressive deposit/loan expansion goals. There will also be considerable investments into the highly competitive microfinance segment.

"Foreign banks will exploit their access to international markets by shoring up trade services and transaction banking, while mitigating their local network shortcomings through multichannel and deep solution capabilities," said Sui-Jon Ho, market analyst, IDC Financial Insights Asia/Pacific.

The regional development banks will divert their focus to debt recovery services, payments processing, outsourced development of commercial applications, and possibly full commercial banking, said Ho.


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