• Customers started moving towards digital channels during the pandemic
• The main focus is on digitising processes for wholesale, SME and micro, and retail businesses
• Banks have to be fast and agile, and follow regulatory requirements

Bank Mandiri, one of the largest banks in Indonesia in terms of assets, started its digital transformation in 2019. The bank was established in October 1998 as part of the government bank restructuring programme. In July 1999, four state-owned banks, including Bank Bumi Daya, Bank Dagang Negara, Bank Exim and Bapindo, were legally merged into Bank Mandiri.

Adinata Widia, who is part of the digital transformation team, joined Bank Mandiri in September 2014. He brought his expertise to help improve the bank’s existing processes.

Before moving to the transformation office, Widia was the bank’s head of transaction banking, where he managed to simplify processes for the bank and corporate customers and implemented a significant number of digital connections using application programming interface (API), enabling around 1.3 million transactions a month. Serving between 70 and 75 corporate customers, with IDR 15 trillion ($1 billion) to IDR 18 trillion ($1.2 billion) worth of transactions a month.

Widia is currently investing his time in helping the bank digitise its processes, focusing on the micro, small and medium-sized enterprises (SMEs). Prior to joining Bank Mandiri, he also worked at Bank Danamon, CIMB Niaga, Lippo Bank and Citibank NA Indonesia in various senior product development roles.

The following is the edited transcript of the interview:

Foo Boon Ping (FBP): What is your vision for Bank Mandiri as it goes through a digital reinvention?

Adinata Widia (AW): We have many competitors in the market, not just traditional banks, but also fintechs, especially in terms of their product offerings and service level agreements (SLAs). Being a traditional bank always has a problem internally in terms of process. When the board asked me to move from my previous role in transaction banking to the transformation office, the challenge was to review existing processes to improve and digitise them. I engage with our venture capital, Mandiri Capital (MCI), to get in touch with fintechs and collaborate with them to help us maintain our market share or increase our revenue. The bank needs to transform. This is the time. Otherwise, we will miss the train.

In terms of open banking, most of our connections right now – big customers, vendors and fintech partners – are using APIs. These new players disrupt our traditional banking business, but in a way, it also helps us get more transactions. For the past two to three years, e-commerce has been very big in this market. We know that they cannot handle the payments by themselves. They still need banks to do the payment, so we came up with our own e-commerce solution. We partnered with them as one of their settlement banks.

We also leverage our position. We have a lot of products, not just banking products, but also the products of our subsidiaries. For example, our fund management products, such as Mandiri Investasi. We also have multi-finance products and insurance. We leverage those e-commerce to be able to sell our product. We see them as a partner rather than a competitor. It brings more transaction volumes and gives us a fee-based income. They also maintain their account with us, the funding is also with us. The important thing here is not to compete, but partner with them. You also have to choose who you partner with. We partnered with some fintechs before, but it didn't go so well. With their process, although fast, the fraud risk is quite high. We learned from that.

Customers started moving towards digital channels during the pandemic

FBP: Has COVID-19 been a driver for Bank Mandiri in terms of accelerating some of the opportunities that you have identified?

AW: In the past, customers who are not willing to use our digital channel, are slowly moving towards these. A lot of people who used to go to ATMs are starting to use our internet banking. The number of transaction in the branches reduced significantly. But while the number of transactions is increasing, it’s not apple to apple since the economic condition has not rebounded yet. There are still some businesses closing.

Our physical merchants are affected during the COVID-19. E-commerce is increasing. People are transacting with their credit and debit cards on the e-commerce platform (Bukalapak, Tokopedia, Shopee) for their daily shopping, like groceries or even meat.The positive thing is, the bank doesn't have to push the customers to move, because the customers willingly move to the digital channels by themselves. Here, we see an opportunity where we can come up with new solutions for these people, so that they are more eager in using digital platforms rather than going to the branch or even using ATM. The impact will be very good.

At the bottom level of the value chain, there’s always an issue of cash. People go to the store and pay using cash. With the introduction of digital money, people have the option to pay using that. The value chain can now be connected through a system. In the future, we are going there. There are still a lot of cash, but the trend is going down. That's a good starting point. One day, the cash composition will be very minimal, so everything can be part of the system.

FBP: What is your key pillar and strategy to succeed at Bank Mandiri?

AW: Speed is the key here. Right now, we are trying our best to move. We know we cannot move as fast as fintechs, because they are less regulated than us, but we use fintechs. I'm currently looking at the business processess of SMEs. We identify the business processes from end to end and we find out where we can make it digital. The relationship management (RM) process, getting the customer experience to become better. The key challenge here is people. It's not easy to convince people who are used to everything manual.

We are trying to introduce the use of biometric ID as a replacement for customer signature. The discussion will take some time because of regulation, that’s the challenge. The opportunity is that once we have that, we can move faster. We also leverage our investment in MCI, which is investing in quite a lot of fintechs.

Collaborating with the business and product units to digitise the processes

FBP: How much of a constraint is your current technology?

AW: We started fixing our IT architecture. We started using more applications such as APIs. We also started using cloud and artificial intelligence (AI). There is a project that provides a 360 evaluation of customers. We are also investing a lot in the database. There are a lot of initiatives going on right now. In the transformation office itself, we have three heads of projects. I'm one of them. I'm doing the SME and micro, there is another guy doing the wholesale and another guy doing the retail. That's how serious we are with the transformation. We work together with the business and product units related to the pillars – wholesale, SME and micro as well as retail. We collaborate with the business and product units related to that. We want to make sure that our investment and strategy going forward for the next four or five years is really moving toward digitising the processes in each of the pillars.

FBP: What are the advantages and disadvantages among the different types of platforms that are available today?

AW: The existing connection with the traditional vendors is already there. As long as it's still up and running, and it's quite good, we don't want to disrupt that. We don't want to jeopardise the transactions that are already working well. But for the new solutions, products and use cases, we try to move it to the vendor that is using platform as a service. That is the strategy IT is doing right now.

FBP: Are there key digital initiatives that you want to highlight as part of your strategy?

AW: Our main focus is more on how we can digitalise the lending process for SME and micro businesses. We have a lot of internal systems and manual processes. There are still a lot of work we can do to digitise the processes. We can simplify the SLA from weeks to days.

We only started this transformation in 2019. The impact is not that big. But during my time in transaction banking, we managed to do quite a lot of digital connections to our customers using API, host to host. By 2019, they have around 1.3 million transactions a month. With close to 70 to 75 big corporate customers that we serve, the value of transaction is around IDR 15 trillion ($1 billion) to IDR 18 trillion ($1.2 billion) a month. That’s a good achievement for us because we managed to simplify the processes with our customers. We also introduced a lot of digital applications.

One of the projects that we are doing is digital onboarding of our SME customers. We launched the retail project last year, where customers can open an account without going to the branch.

Moving fast and acknowledging the regulations

FBP: How are you teaching the people at your bank how to handle risk and failure and what is one professional risk that you are proud of taking?

AW: Based on the analysis that we see in the market towards fintech, they are fast and agile, but they are prone to fraud and credit risk. There were more than hundreds of peer-to-peer lenders in the market, but now they are being closed down by the Otoritas Jasa Keuangan (OJK is the financial services authority of Indonesia) because of fraud issues. The key strategy here is that, we should move fast, but we should not ignore the regulatory part of it.

What we did differently was the use of agile concept. In terms of system development, we use streams, so we don't wait until the whole thing is completed. Before we roll it out. Basically, before the project starts, we plan the blueprint, and then we create multiple streams that can move individually. But at the end of the day, it can be connected. That creates a faster delivery to the market.

FBP: What personal advice do you have for people stepping into digital transformation?

AW: It's difficult. You have to move fast, but you cannot rush. You really have to look at all aspects, because banks are highly regulated. We are highly regulated for a reason, and it's to protect our customers and ourselves. If you're rushing, everything will backfire. All parties involved need to have the same vision. Before you start the initiative, you have to sit together and make sure that your vision is aligned. Once your vision is aligned, everybody knows their role. You need to have one common goal and same vision.

FBP: Thank you so much.