Banking on digitalisation

Image courtesy of Conny Schneider

Because of movement restrictions brought about by COVID, many financial institutions needed to embark on their digital transformation right away so that their customers could continue transacting. Kevin Kane, Chief Technology Officer at Amar Bank, shares how his organisation fared and what they learned during these past couple of years.

What are your top three priorities for the year?

Amar Bank’s top three priorities for this year are business growth, new digital product development, as well as enhancements in cybersecurity. Business growth means from a technology point of view, how technology can cope with the business growth projection in terms of scalability and reliability.

Kevin Kane, Chief Technology Officer, Amar Bank. Image courtesy of Amar Bank.

Along with those initiatives, there will definitely be new features coming up from our existing digital products (i.e. Tunaiku – Digital Lending Platform and Senyumku – Mobile-Only Intelligent Bank), hence we can gain more traction in acquiring new users and retaining existing customers.

Regarding digital product development, we are thinking of delivering a new digital product vertical which can help bring in a new revenue stream. This product won’t be similar with our current B2C products, but rather related to B2B. Thus, it will come with new challenges for technology to deliver that.

Last but not least, cybersecurity is still our top priority because it is a continuous improvement on a year-to-year basis. In addition, after we are able to bring more traction for new users, build new products, etc, it also means the assets that need to be protected are increased and the cybersecurity risk is also growing, so as an organisation we should be able to prevent all potential losses due to cybercrimes.

What were some of the biggest lessons of 2021? Have we learned these lessons, and is the world ready for another pandemic?

In my mind, COVID-19 has brought certain positives, but also some negatives. The positive is that we all know digital acceleration has taken place. Most people have gotten into digital in a much shorter period of time; what would have happened in 10 years has happened in one year, and that is true, we are seeing the same digital acceptance. That’s on the positive side.

However, on the negative side, I see that the pandemic has increased the gap between the haves and the have nots. Society now has a wider (economic) gap, and according to research by CNBC, in the United States, women and people with lower education are affected worse by COVID-19. Hence, the gap – which was already there in most of society – has increased. So you can say that the underserved and unbanked population has actually got much worse impacted than the ones who were financially included.

What do you see as being the most impactful technologies coming into play over the next year? What are your broad technology predictions for 2022?

Technology is an enabler, so what’s the outcome we are trying to achieve? As a concrete example, in Indonesia, we are trying to achieve more financial inclusion. That’s where technology can reduce the cost, and the current technology we are using is data analytics.

Moving forward, blockchain is definitely one of the very promising technologies which can enable KYC (know your customer) much more easily. It’s the next promising technology for e-KYC to reach more customers, especially in the rural areas.

AI (artificial intelligence) and IoT (Internet of Things) will also play an important role. In addition, the cost of IoT has gone down these past two years.

All in all, these technologies will be pivotal in the years to come, especially when it comes to achieving financial inclusion for our society and providing financial services to underserved customers.

How has your workplace transformed over 2021, and what are your precise workplace transformation strategies for 2022?

Amar Bank has a series of programs to improve the skills and welfare of our people so that they are ready and prepared for the current climate, especially with the COVID-19 pandemic. Our organisation has a culture and startup mindset, so it is already familiar with remote work processes and has a capable infrastructure to support it.

When the pandemic happened, all levels of Amar Bank’s people were ready for the remote work process, and since last October 2021, we have implemented a work-from-anywhere policy.

Amar Bank was also recognised by the “Best Places to Work” awards in 2020. It is an international certification program that provides companies in various countries the opportunity to learn more about employee engagement and satisfaction, and rewards companies that provide the highest standards in terms of working conditions.

Could you talk about the IT infrastructure that supports the operation and management of Amar Bank?

The use of digital technology is not limited to Amar Bank’s products and services. It is also optimised for the company’s operations to help streamline our workflows, making them more effective and efficient for the employees. The latest technologies being implemented by Amar Bank include the following:

  • Big data and analytics
    Amar Bank has been utilising big data and analytics since 2014, as evidenced by the success of the Tunaiku product, which utilises predictive data modelling. Learning from our success there, we implemented big data and analytics in the Senyumku product as well.
  • Cloud computing
    Amar Bank always prioritises the cloud, as 90% of our applications, services, and infrastructure are already cloud-based, while the remaining 10% is an investment in core banking devices and other supporting applications required by regulators.
  • AI and machine learning
    Currently, Amar Bank is developing AI and machine learning to provide personalised services for customers. In August 2020, we launched Senyumku as the first mobile-only intelligent bank application in Indonesia that utilises AI in providing banking services to customers and the public, especially millennials. Senyumku has three flagship features, which are namely:
    • Savings, which offers an interest rate of 5.5% per year.
    • Invest, which offers an interest rate of 9% per year for time deposits.
    • Expenditure, which tracks daily expenses and uses AI to monitor the customer’s financial health according to their transaction habits.

Senyumku is designed to help build the habit of saving, keeping track of expenses, and investing regularly for the future.

How will your vertical be impacted by the pandemic and the post-pandemic reality? What will the “new normal” look like for your industry?

Based on our financial statements in the third quarter of 2020, Amar Bank showed positive growth. As of September 2020, we achieved a net profit of 25.6 billion IDR, growing 25% compared to our net profit as of June 2020 of 20.4 billion IDR.

Then, until the third quarter of 2021, Amar Bank recorded a total loan of 2.08 trillion IDR, or grew by 28.7% during the current year (YTD). Our loan portfolio has reached more than 64% for productive loans and the majority of contributions came from the digital lending platform Tunaiku, which was recorded at 1.7 trillion IDR, up 35.4% YTD.

Based on the financial report in the third quarter of 2021, despite all the challenges and risks from the COVID-19 pandemic, our liquidity ratio remains solid up to September 2021. The LCR (liquidity coverage ratio) is at 1.979%, which indicates that Amar Bank’s liquidity is still relatively good. Our CAR is 31.2%, which is far above the regulatory requirement of 24.5%.

This shows that in terms of lending, Amar Bank continues to grow well this year. The pandemic has pushed society to adopt digitalisation faster than we thought, thereby increasing the huge demand in the market. Given that we are already fully transformed digitally, we have an upper hand in serving the growing market demand.

During this pandemic, the features and innovations that we develop and launch for the public are always in line with the goal of bringing banking into people’s lives without having to leave their homes or places of residence. This is not only focused on opening an account, but also when financial transactions occur (both financial transactions such as transfers, as well as access to loan products) until we offer AI features that can improve people’s saving habits.

We realise this is very important for our customers, and the community at large, especially during a pandemic like this, which requires us to carry out activities from home, and be more aware of financial conditions so as to have better control over our lives. These features have been validated by our own customers by conducting customer feedback loops, both quantitatively and qualitatively.