Press Release

Indonesia Banks: Avoid One-Size-Fits-All Strategies, IDC Cautions


May 17th, 2012

Global Information Inc. would like to present a new market research report, "Business Strategy: Rethinking Indonesia's Financial Boom - A Banking Prognosis for 2012 and Beyond" by IDC Financial Insights.

Banks that want to succeed in Indonesias booming banking industry must avoid one-size-fit-all strategies, but instead come up with varied offerings for different types of banking requirements. Over the years, the Indonesian banking sector has broken into distinct segments, each demanding unique solutions that threaten the viability of jack-of-all-trades organizations.

According to Michael Araneta, Associate Consulting and Research Director for IDC Asia/Pacific, "There is simply no one all-encompassing strategy that can accommodate Indonesias growing financial maturity and the robust demand for product sophistication that it entails. Banks will have to become more focused on priority segments such as microfinance, private banking, SME banking, mass consumer banking, and so forth in order to succeed."

Emergence of new banking champions in Indonesia will fuel IT spending boom

IDC Financial Insights has qualified Indonesia as one of Asia/Pacifics top five IT spending hotspots for 2012. The banking sectors projected IT budget is expected to grow by 14.3% this year, half of which will be accounted by the nations 10 largest banks. Mid-tier foreign institutions will in turn be responsible for 15.5-18% of sector-wide IT spending, closely followed by the countrys 26 regional development banks at 14.5%. The remaining 13.2% will be attributed to Indonesias numerous, yet fragmented, smaller lenders.

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Investments to be made by the top 10 banks will be channeled into credit risk management solutions, core banking system upgrades, and IT infrastructure optimization that will support aggressive deposit/loan expansion goals. There will also be considerable investments in the highly competitive microfinance segment.

Sui-Jon Ho, Market Analyst for IDC Financial Insights Asia/Pacific comments, "Each class of banks is positioned differently, and thus has varied business imperatives. Foreign banks will exploit their access to international markets by shoring up trade services and transaction banking, while mitigating their local network shortcomings through multichannel and deep solution capabilities. Conversely, locally-attuned regional development banks will divert their focus to debt recovery services, payments processing, outsourced development of commercial applications, and possibly full commercial banking."

Sui-Jon concludes, "The development of unique alternative banking models and revenue streams distinguishes the present-day Indonesian financial industry from many other markets. In many ways, the speed and extent of such changes have leveled the playing field. Be it the old and sluggish, or the new and inexperienced, each bank must overcome its inherent weaknesses while playing to its strengths in order to stay in the game."


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