Interview: Batara Sianturi
As financial technology (fintech) has penetrated underserved markets, to what extent can it be regarded a disruption to the banking sector?
BATARA SIANTURI: We are seeing fintech develop through partnerships. This is the age of collaboration, with banks and fintech mutually dependent on one another. GOJEK, Traveloka, Tokopedia and Bukalapak are Indonesia’s four so-called unicorns, being start-up companies valued at over $1bn. As start-ups are established, fintech, e-commerce and market players collaborate with banks. These enterprises maintain their accounts and base of customers with banks to facilitate payments. Although customers will increasingly use e-commerce for their shopping needs, transactions will still have to be fulfilled through payments in financial institutions. The role of banks is to embrace this disruption, not resist it.
As we have seen in the US market, online transactions are likely to eventually overtake offline ones. It is a winwin situation, as there is a huge base of bank account holders who want to have access through an online platform. Each player will need to adjust, as banks have historically been subject to economic cycles.
Fintech players can help contribute value added through advances in cybersecurity, banks’ bull and bear market experiences, and the provision of retail and corporate platforms. In corporate banking, financial institutions facilitate collection, payment and Treasury management. Meanwhile, fintech players mostly do business-to-business or business-to-consumer interactions, which require payment and collection.
What are the main drivers of credit growth in 2019?
SIANTURI: When we talk about credit growth, we must distinguish between the retail (commercial) segment and the wholesale (corporate) one. As Indonesia has a 265m-strong population and 5% GDP growth, economic expansion will be primarily driven by its young, active and productive population. As the country develops and the population moves up the economic ladder, retail banking will see credit continue to grow through both retail lending and credit card spending.
Of course, this will be closely linked to the expansion of the younger population. The same applies to small and medium-sized enterprises (SMEs), which are the backbone of the economy. SMEs will continue to thrive in commercial banking, as big corporate players need suppliers and buyers as part of the ecosystem.
A distinction also must be made between local and multinational corporates. Local corporates are expanding abroad, and some unicorns are branching out across the ASEAN region. That constitutes a crucial part of local players’ growth strategy. Indonesia has seen a surge of traditional corporates like Unilever, Philips, Coca-Cola and Procter & Gamble. Meanwhile, Asian multinationals, such as ZTE and Anhui Conch Cement Company in China or Pou Chen in Taiwan, have increasingly created frameworks to invest in Indonesia.
Having joined the ranks of economies worth $1trn, the country is working to remain an attractive investment destination. In the World Bank’s “Doing Business 2019” report, Indonesia was 73rd out of 190 nations. Vietnam outranks this at 69th, so a lot of work remains to be done. Nevertheless, domestic credit growth will commensurate with economic expansion.
How can global banks attract investments and improve the investment climate in the country?
SIANTURI: Global banks primarily add value through their connectivity. If investors are considering investing in Indonesia, these banks can advise them on licensing or the regulatory environment. Not all financial institutions have a network within or beyond Asia. That will continue to add value, especially for emerging regional clients, such as Samsung, ZTE and Alibaba.
International players have a key role in complementing local and regional banks. They provide connectivity, regardless of their region of origin, as they can access frontier and emerging markets through global banks.
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