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Keeping Pace With the Radical Change in the Indonesian Financial Industry

With a population of more than a quarter of a billion people, Indonesia is the biggest economy in the region. As with many countries, the COVID-19 pandemic will surely have adverse effects on Indonesia’s GDP (which has consistently maintained at a growth rate of around 5% in recent years). However, rapid digital transformation initiatives, as well as the rise of Fintech players in Indonesia, will help the nation attenuate the worst effects of the crisis and bounce back stronger than ever.

The World Bank approved a US$ 300 million loan earlier this year to assist the Indonesian government in implementing financial sector reforms that will help sustain economic growth and achieve the country’s goals. Interestingly, about half of the adult Indonesian population do not have access to bank accounts, leaving them with limited opportunities to invest in their future and protect themselves from financial disaster.

But times are changing and recent global events have increased people’s reliance on technology. In Indonesia, the Jakarta Post reported that financial technology saw a rise during the pandemic, as banks were required to increase and improve digital payment solutions and even provide social safety nets for workforces as well as assist with other public services. Bank Indonesia and the Financial Services Authority have pledged support for financial technology innovation during these challenging times.

With the increasing demands and competition from digital native Fintech players, traditional banks are in a race to digitally transform, improve their services and bring themselves in line with the data-driven era.

However, to do that, they must start by ensuring that they get their digital foundations right and move away from traditional systems that were built for a time before the data explosion.

Overcoming Radical Change and Challenges, With Data

Currently, there are about 115 banks in Indonesia, each with a unique reach and offering. For most of them, advancing digital transformation to become more agile, remain relevant to their customers and making the most of their data are the primary challenges. They are now investing in more technology and developing applications to keep up with the pace in the industry.

With banks having to deal with, and make sense of, more and more data, they must have a data platform that can connect and simplify the whole data lifecycle, regardless of the data’s location and form. This is critical in an era where scalability is a must-have and even banks will be increasingly depending on cloud technologies (both private and public). Cloudera developed the industry’s first enterprise data cloud in order to help organisations overcome these very challenges.

How can banks benefit from the enterprise data cloud approach? With the Cloudera Data Platform, banks can have a 360-view of their data and unlock the power of data to increase customer retention and profitability, improve regulatory compliance, identify criminal activity such as fraud and money laundering and incorporate all kinds of analytics. These truly are the “superpowers” that every modern bank should seek in today’s age – and Cloudera brings it all within their grasp.

Bank Danamon for example, specialises in offering corporate and small business banking, consumer banking, trade finance, cash management, treasury and capital markets. When the bank invested in Cloudera’s machine-learning platform, it enabled the bank to achieve real-time customer marketing, detect fraud at scale, at a much faster rate than ever and automate its anti-money laundering capabilities with a system that will continue to learn and get better as time progresses.

Another bank, Bank Mandiri, is able to rely on Cloudera’s data warehouse to maintain its competitive edge, facilitating the delivery of a data-driven, personalised customer experience while reducing IT infrastructure costs by 99%. Through this, the bank was able to shift its marketing approach from sending broad-based communications to delivering tailored messages to targeted groups of customers. Cloudera data warehouse empowered the bank's marketing campaigns through a variety of communication channels such as the Internet, mobile and interactions with customer service.

Meanwhile, one of Indonesia’s oldest banks, PT Bank Rakyat Indonesia, used Cloudera’s Enterprise Data Platform to build an agile and reliable predictive augmented intelligent solution to enhance its credit scoring system. The solution analyses customer transaction data and predicts the probability of customers defaulting on payments the following month. The bank also developed a machine-learning model for fraud detection by creating a behavioural scoring model based on customer savings, loan transactions, deposits, payroll and other financial data.

Superpowers indeed.

These sound like futuristic functions straight out of sci-fi but they are not. These capabilities and more are now possible for the financial industry, with the right solutions and the foundational data platform built for the modern, data-driven era.

There is no denying that Fintech will continue to disrupt traditional banking services. In order to compete and remain relevant in an industry that is ever-evolving, to improve customer satisfaction and make the most out of all their data assets, banks in Indonesia will have to embrace digitalisation.

Be it the ability to develop new algorithms to understand customers better, protecting customer data or even reaching out to the unbanked, Cloudera offers a variety of solutions that can help any bank to remain competitive in the industry.

To find more about how Cloudera can help financial players be competitive in the financial sector, click here.

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