With 271 million people inhabiting 17,508 islands, Worldometers positions Indonesia as the fourth largest country in the world by population. In 2011, ownership of a bank account by adults stood at 20% said the World Bank. By 2017, the OECD estimated that 49% of the adult population (aged 15 and above) had an account in a financial institution while commercial bank penetration is roughly 17.4 branches for every 100 000 adults in 2016 (World Bank, 2018).
So when it comes to financial inclusion, the country is racing towards the light at the end of the tunnel. But the challenge remains. According to the report card Digital Financial Inclusion in Indonesia by the Bank Sentral Republik Indonesia, up to 64% of the country is largely unbanked, with cash the dominant form of transaction.
One of the challenges for many financial institutions is access to reliable credit data of potential customers. Afterall, the basis of banking is trust, and trust is rooted on a customer’s creditworthiness.
One financial institution has somehow solved the conundrum by building a massive data store. Bank Rakyat Indonesia (BRI) is ranked 10th largest Southeast Asian bank by total asset.
Founded in 1895, BRI specializes in microfinance loans and serves approximately 30 million retail clients through more than 4,000 branches, units and rural service posts in Indonesia. To further grow its business, the bank sought to harness the full value of their customer data to not only retain existing customers but also acquire new ones.
With the huge amount of customer data gained over the years, the bank set out on a mission to digitalize its operations by deploying a modern data management platform that was scalable, secure and compliant.
At the annual Cloudera Analyst Summit in New York City this September 2019, FutureCIO spoke to Kaspar Situmorang, executive vice president at Bank Rakyat Indonesia, to uncover the financial institution’s secret to successfully grow its customer base.
With a Return on Equity (ROE) of 34%, BRI is one of the most profitable banks in the world. It also claims to have nearly 50% market share in the micro loans segment – a business segment that traditional banks tend to avoid because of the perceived high cost of doing business.
Making the case for big data
“Back in 2017 we try to rethink how do we do our micro business and ultra-micro. We found out that the essential advantage of BRI is the massive amount of data that we own. We built a contextual risk management using big data. We focused on three things: credit scoring, fraud detection services, and merchant assessment services,” he elaborated.
Recognizing the importance of keeping this data secure, the bank was accredited with ISO27001 by 2018.
Reducing time to market
BRI’s Situmarang acknowledged that prior to the digitization of its micro loan business, a human-centred lending process would take about two weeks to complete a transaction. Starting in 2017, the bank started to digitize many of its processes, introducing apps designed that reduced processing time for loan applications to two days.
Not content with that it already accomplished, BRI took the challenge a step further by streamlining how it processes loans. Today, loan transactions can be completed in two minutes, thanks in part to the bank’s use of big data.
Big Data Learnings
Dependence on third-party sources is not something Situmarang recommends.
“You cannot depend 100% on system integrators or vendors. Upskill your team with the technical expertise they need to do the job. Get them certified and trained. This way you set the pace of development,” he concluded.
Click on the video to watch the full video, and discover the secrets to BRI’s big data strategy.