The competitive landscape for digital banking in Indonesia is mindboggling, with 3 million users added to the growing list of players in 2020.
Bank Amar is the oldest of the lot, but it gets overlooked. It has about 450,000 customers since having launched in 2014. Given it is targeting the underserved in Indonesia, this is a small number.
But its founder and CEO, Vishal Tulsian, says the bank’s head start gives it better big-data analytics so it can provide a more customized offering and a more accurate credit score. Amar also has the longest experience in remote customer onboarding and KYC.
“No neo-bank has this capability,” he said, adding that Bank Amar has been profitable since 2016.
Tulsian went to Indonesia in 2014 looking to create a digital bank, with the backing of the Tolaram Group, the Singapore-based holding company of a global conglomerate with operations based in Nigeria.
Indonesia has no specific license for a purely digital bank, and it took a lot of explaining to the regular, OJK, about fintech, data-based credit scoring, and predictive analytics. But the regulators were open, and Tulsian and Tolaram acquired a local bank to fit the license requirements, which they refashioned into Bank Amar.
Digital banking heats up
Since then other banks have done something similar. The biggest is Jenius, another bank restructured as a digital bank, this one owned by an incumbent, Bank PTPN. Permata Bank and BCA are also launching digital-only brands.
Then the Singaporeans began to show up, led by DBS Digibank, and more recently with OCBC Nyala and UOB TMRW opening shop.
On the other side, the big tech companies are also acquiring banks or forging bank partnerships. A big local private-equity firm, Northstar Group, acquired a local lender that has been rebranded Bank Jago, which is now partnering with Gojek.
Another e-commerce player, Akulaku (backed by Alibaba), has acquired a local lender that will be called Bank Neo Commerce, and it is expected to launch this year. Its rival Bukalapak has tied up with Standard Chartered’s fintech platform, Nexus.
Sea Group, operator of Shopee, just announced in February that it had acquired another local lender and will launch it this year as SeaBank Indonesia.
There are also plenty of pure fintech lenders, such as Investree, Modalku (Funding Societies), and Oriente’s local operation, Finmas.
Lastly, the regulations are going to change to make life easier for some of Bank Amar’s competitors. OJK has said it will introduce a digital banking license later this year. This will allow big platforms like Gojek and Akulaku to offer banking services on their apps via their partners.
First-mover advantage
Tulsian says many of these entrants will find it hard to compete, despite their size and backing. The bank already has a profitable lending business, while many of the fintechs are still doing payments and looking for ways to monetize their users.
Bank Amar, on the other hand, has a lending platform, Tunaiku, providing unsecured loans to consumers and owners of micro businesses, for up to about $1, 400 for loans out to 24 months. The platform has disbursed about $400 million in loans.
Recently the company introduced a new product, Senyumku, that steps up a tier, that incorporates financial planning. To make an impact on a user’s behavior, so they save to meet their goals, is hard. “It requires hyper-personalization,” Tulsian said.
While he acknowledges this is hard to do, he argues Amar is already ahead of erstwhile competitors, most of whom have not yet launched – which he says will give the bank an advantage in data analytics that rivals will struggle to match, at least for a while.
Senyumku is aimed at people who are already banked, which does open Amar to fierce competition from other digital or neo-banks. Tulsian says Amar is only going for one tier up from its Tunaiku borrowers, although that does sound like a similar profile as many of his rivals – some of which are extremely well funded.
Tunaiku will remain the bank’s primary product, and the fact that it already lends profitably will differentiate it from the tech companies that are scrambling to monetize their users.
New customer segments
Although Amar wants to stick to its core lending – and not chase broader products in wealth, cards, or insurance, as its larger banking competitors do – he says the company is now working to extend Tunaiku to the business segment.
“We will be launching Tunaiku For Business this year, offering unsecured loans up to $10,000 over three years,” Tulsian said. “This will provide working capital to small businesses.”
His biggest threat, he says, is not the business model: it’s having all these new entrants poach his staff. He says the best route is to make sure the company’s startup culture remains attractive, and to not get distracted by the inevitable marketing blitz from new entrants with deep pockets.
“They’re going to make a lot of noise,” Tulsian said. “We’re just not going to do what they want to do.”
