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The Indonesian Government is trying to use block chain technology to realize digitalization of bank assets

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The Indonesian Government is trying to use block chain technology to realize digitalization of bank assets

October 15
04:09 2019

According to Indonesia’s finance minister Sri Mulyani Indrawati, OTAKUPAY specialized in blockchain will join CHAMP RICH, the traditional financial giant, to enter the Indonesian financial market on a large scale and carry out a comprehensive acquisition of several banks located in Indonesia, among which including J TRUST BANK of Japan with over 100 branches and Rabo BANK of the Netherlands. The acquisition will cost more than $5 billion and create more than 20,000 jobs across Indonesia. Meanwhile, OTAKUPAY will try its best to help the Indonesian government realize asset digitization, OTAKUPAY spokesman Frane Selak said, so as to align traditional financial services with digital financial services, and accelerate the integration of traditional banking services with digital assets.

Indonesia Banking: Outlook and Industry Drivers

Loan Growth

Loan growth has slowed in recent years (from 2013) owing to the lower interest rate environment resulting in an influx of cheaper funding alternatives (e.g. bonds and other debt structures).

2018 saw a modest recovery which should pick up as the interest rate cycle turns, and as the general business environment in the country recovers from the slowdown of the last few years.

However the improving environment is likely to benefit banks with superior deposit franchises (e.g. BCA, BNI) disproportionately more.

Funding and Deposits

Liquidity remains tight, with YoY deposit growth slowing to just 5% in 2018 (2013: 14%).

Situation likely to persist, driven by structural trends, mainly.

Profitability and Asset Quality

Increasing competition for deposits in a tight funding environment expected to impact NIMs.

Also, while BI has pre‐emptively hiked rates in tandem with the Fed, the pace may slow in 2019.

A strengthening Rupiah from its significant devaluation in 2018 expected to drive lower NPL formation.

The implementation of IFRS 9 in 2020 has also ensured banks adopt more prudent provisioning policies in preparation.

Tech Opportunities / Challenges

Technological advancements providing a solution and impetus for increasing operational efficiency and cost rationalization.

The number of physical bank branches and outlets has declined gradually over last 5 years, with 2018 witnessing the biggest drop.

‘Branchless banking’ inclusive finance initiatives with the potential to access large rural population (micro segment).

Growing adoption of electronic wallets and payments – however the field is competitive and includes fintechs, telcos etc.


OJK to play a more active role in its oversight of the banking (and financial) industry.

Key significant regulations introduced in the past few years include:

Financial conglomerates – to be established for 2 or more financial company holdings.

Single presence policy – reaffirmed previous BI regulation.

Fintech – various regulations governing P2P lending, e‐money, crowdfunding.

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Country: Indonesia