Danai Pathomvanich
Jun 12, 2015
As smart phones proliferate, many mobile finance success stories are beginning to appear.
Recently, I had the pleasure of reading how Budi Gunadi Sadikin, CEO of Indonesia’s Bank Mandiri has successfully attacked his country’s consumer-banking explosion by using easy-to-use minimalist digital smart phone platforms.
Indonesia’s retail banking boom
During a recent interview with McKinsey’s Rik Kirkland, Budi said that since becoming CEO in 2013, he has grown his bank by focusing on digital consumer transactions, spearheading, among other things, efforts to make peer-to-peer money transfers as easy as sending a text message.
“When I joined the bank, in 2006, the market cap was around $3 billion. It’s now touching $33 billion. Our ambition is to reach a market cap of around $55 billion by 2020, making us the largest bank in Asia.”
Between now and 2030, Budi said 50 million Indonesians will enter the middle class. “They will all need banking services such as savings, mortgages and car loans.”
When he joined the Bank in 2006, the previous CEO asked him to develop retail-banking, the bank’s consumer business.
“....now, around 50 percent of the revenue of the bank comes from consumer banking, or retail banking.”
Massive consumer behavior changes
Budi, a nuclear science graduate with an IBM background said he told his team, the fast-moving digital world will result in massive consumer behavioral changes that offer both a threat and an opportunity.
“We have to keep disrupting ourselves, otherwise we will be disrupted by somebody else.”
He said the bank had to revamp the way it was doing banking, especially in the way it serviced payment-side customers.
Most of the bank’s customers use mobile banking for peer-to-peer transfers. Initially, his team designed an iPhone-based mobile system that took six steps to complete a transfer.
“That’s too long.”
Banking as a easy as texting
He concluded that at the end of the day, people just wanted to send money like a text message.
“They used WhatsApp, BlackBerry Messenger—I do it myself.”
As a consequence, instead of building it own application, he asked the Bank’s development team to build applications inside WhatsApp, BBM or LINE.
The customer would then only have to press an emoticon to transfer money.
Budi’s ideas have apparently been most successful.
When he joined the Bank in 2006, 60 per cent of all transactions were done through the branches and 40 per cent electronically.
“.... today 92 per cent are done through electronic channels.”
Start-up mentality
Another key factor to Budi’s success is that he preaches change as an opportunity.
During a seminar in Hong Kong, he realized that spending money on internal IT was too bureaucratic and usually ineffective.
“It becomes very expensive and very, very slow.”
As a consequence, Bank Mandiri placed funds into private equity start-ups, where he clearly saw that speed and costs were totally different.
“Six months after that, I went to Berkeley, took a private-equity class, and with one Indonesian entrepreneur and Kompas Gramedia, the largest media group in Indonesia, we created a start-up using a private-equity fund owned by our asset-management company.”
In six months, the start-up successfully established a “mobile-banking services for financial inclusions” platform” that is currently use by Bank Mandiri.
“....this platform was chosen by the (Indonesia’s) president to distribute a government-to-people subsidy. Because our president wants to eliminate a product subsidy—gasoline, fertilizer, electricity—and have a people subsidy with conditional cash transfer. To do that, he needed a platform. And he’s using ours.”
e-commerce payment system
Bank Mandiri’s payment platform also helped German entrepreneur, Oliver Samwer successfully launch e-commerce companies in Indonesia, including Lazada and Zalora.
“He needed a payment system, and no banks in Indonesia were providing payments for e-commerce at that time.... we supported his start-up. “
The company’s sales in 2014 already exceed $IS100 million.
“Amazing. In just two years.”
