Banking on Indonesia's Future
    Category: Column By : Administrator Read : 1599 Date : Thursday, September 05, 2013 - 05:37:45

    In many ways the global financial crisis was a sobering experience for the global economy, and one of the positive things it did was to unleash the potential of emerging economies. Asia is home to many of these economies and the region has grown rapidly and exponentially in global significance. Research from the Boston Consulting Group forecasts that by 2030, Asia's contribution to global GDP will account for over 50%  and overtake the G7 economies. Private consumption in Asia will also continue to grow in double digits as the G7 economies struggle to maintain positive single-digit growth.   

    As Asian economies develop, the banking sector is going to significantly grow and this is an immense opportunity for banks to establish a full franchise across the region. Corporate and institutional banking is a profitable business model for banks to capture the accelerating trade flows in the region, but retail banking builds brand recognition, which is critical to the scale and success of banks entering new markets.

    Studies by the Asian Banker show that retail financial services contribute 36% on average to a bank's total income in the region, three times more than it did a decade ago, and all signs are pointing to a rise in this number. Healthy domestic demand, strong growth in savings and relatively low levels of debt in Asian markets are creating more opportunities for banks to support the rising wealth management needs of Asian consumers.

    Indonesia is an excellent case in point—with a growing population of 240 million, a significant proportion of young productive individuals and high domestic consumer demand, Indonesia has the potential to develop a banking sector of comparable scale to mature economies in the West. This growth will be driven by a rise in mortgages, consumer credit and wealth management.

    Aside from providing consumers with solutions for their growing financial needs, banks looking to establish a foothold in Indonesia will do well to tailor their service proposition to suit the profile of middle class affluent consumers, a growing segment of some 74 million people. These are highly economically active, mobile and tech-savvy individuals.

    To win a sizable share of the consumer banking market, speed and convenience are essential in enhancing the customer experience. Digital banking will be a key development in the retail banking industry. The demand for online, self-service banking does not mean that the value of personal engagement will be lost on the emerging affluent Indonesian consumer. In fact, the depth and quality of face-to-face financial conversations increases in tandem with the sophistication of the customer's financial needs. This is where priority banking services comes into play. 

    Priority banking is highly competitive and the challenge that banks will face is in attracting and retaining talented relationship managers. However, the contest for wealth management expertise will benefit the development of Indonesia's banking sector by expanding the talent pool of financial professionals and raising the quality of financial services here. As the banking sector in Indonesia matures, we expect the focus of banks to shift from deposit and credit products to wealth planning that cater to mid-career individuals, including funding the education of their children and planning for retirement.