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

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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 chief told Nikkei Asia.

Darmawan Junaidi, president-director, said that when he assumed his role in October 2020 at Indonesia’s largest lender by assets, both financial technology experts and customers doubted the ability of traditional banks such as Mandiri to stay abreast of digitalisation 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 start-ups offering peer-to-peer lending, mobile wallets and other financial services in south-east Asia’s largest economy. All want a slice of the lucrative market in Indonesia, where mobile phone penetration is high but where 80 per cent of the population is either unbanked or underbanked.

“With there being a lot of fintech start-ups, many commented that big financial institutions like Mandiri would become dinosaurs because we weren’t able to come up with digital transformation initiatives,” Junaidi said. 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 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, ecommerce 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 wanted Livin’ to include their services, Junaidi said, adding that the app had about 20mn monthly users, roughly five 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 had not caused problems because Livin’ was built on a system that could 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 pandemic. Next year, Bank Indonesia, the nation’s central bank, has projected a 23 per cent growth in digital banking transaction values to reach $4.5tn.

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 digital.

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

Mandiri posted a 27 per cent year-on-year growth in net income to Rp39tn ($2.52bn) 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 per cent increase in its fee-based income, adding that the bank posted “the strongest returns among the Indonesian banks”.

Mandiri’s share price has risen about 20 per cent this year, outperforming other major Indonesian banks and the benchmark Jakarta Composite index.

Junaidi said the success of its digital platforms had allowed the bank to close some of its physical branches, reducing the number to about 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.”

A version of this article was first published by Nikkei Asia on December 18. ©2023 Nikkei Inc. All rights reserved.

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