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Indonesia’s Bank Mandiri ‘strikes back’ at fintech rivals

Written by Nikkei Asia Published on   3 mins read

Apps are now the core of the state-owned lender’s expansion, its president director said.

Surging downloads and use of its two-year-old digital banking apps are boosting the confidence of Indonesia’s top lender Bank Mandiri as fintech players try to retain existing customers while looking for more among the country’s large unbanked population, the bank’s president director told Nikkei Asia.

Darmawan Junaidi said that when he assumed his role in October 2020 at Indonesia’s largest lender by assets, both financial technology experts and customers had undermined the ability of traditional banks like Mandiri to stay abreast of digitalization in the financial sector.

That was caused by the rise of digital banks backed by regional tech giants such as Indonesia’s GoTo and Singapore’s Sea, as well as fintech startups offering peer-to-peer lending, mobile wallets and other financial services in Southeast Asia’s largest economy. All want a slice of the lucrative market in Indonesia, where mobile phone penetration is high but where 80% of the population is either unbanked or underbanked.

“With there being a lot of fintech startups, many commented that big financial institutions like Mandiri would become dinosaurs because we weren’t able to come up with digital transformation initiatives,” said Junaidi in an interview at Bank Mandiri headquarters in Jakarta last month. But now the bank can show that it “strikes back … [against] players who claimed they would acquire our business [and] erode our market share,” he said.

Junaidi was referring to the current success of the state-owned bank’s digital banking platforms, especially Livin’—a mobile app for retail customers that he called “the real superapp” in an apparent dig at Indonesian tech giant GoTo’s app for ride-hailing, e-commerce and other services.

While basically a rebrand of its old mobile banking app, Bank Mandiri has breathed new life into Livin’ since its launch in October 2021. The app now boasts nearly 90 features, allowing users to perform many functions in-app, from regular banking services and cross-border money transfers to investing in mutual funds and buying airline and concert tickets.

Many businesses want Livin’ to include their services, Junaidi said, adding that the app has about 20 million monthly users, roughly 5 times the amount two years ago.

“We now have nearly 10,000 transactions per second on a regular basis and up to … 18,000 during peak times,” he said, adding that this has not caused problems because Livin’ is built on a system that can handle 35,000 transactions per second.

“We’re even building a capability for up to 60,000 transactions per second,” he said. “And I’ve asked to start the development … [for] 100,000 transactions per second.” That would be one of the highest usage-rate capacities for any mobile banking app in the world, he added.

Digital banking has posted annual double-digit growth in Indonesia over the past several years, a trend further accelerated by the Covid-19 pandemic. Next year, Bank Indonesia, the nation’s central bank, has projected a 23% growth in digital-banking transaction values to reach IDR 71 quadrillion (USD 4.5 trillion).

Apart from Mandiri, Bank Central Asia—the country’s largest private lender by assets—and Bank BTPN, another large private lender, are among the most aggressive traditional banks in the space.

Mandiri has also launched digital banking platforms targeting wholesale corporate customers and small businesses, both of which show growth potential.

Mandiri posted a 27% year-on-year growth in net income to 39 trillion rupiah in the January-September period. Research company CreditSights in a November note wrote that higher transactions on Mandiri’s digital platforms contributed to a 10% increase in its fee-based income, adding that the bank posted “the strongest returns among the Indonesian banks.”

Mandiri’s share price has risen 20% this year as of the close of trading on Wednesday, outperforming other major Indonesian banks and the benchmark Jakarta Composite Index.

Junaidi said the success of its digital platforms has allowed the bank to close some of its physical branches, reducing the number to around 2,200 from 2,600 three years ago.

“The technology and digital support … is making our operations leaner while our business continues to grow,” he said. “Our market penetration is becoming more intensive, although we have fewer branches.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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