Less is more: Digital Innovation for Financial Inclusivity

Financial inclusion services reminds us in order to achieve a successful digital transformation, having a proper contextual understanding is as important as developing the technology itself.

When we think about digital disruption, a sophisticated killer app is usually what comes to mind. That might not be the case with BTPN, a Bank from Indonesia who serve the micro segments (often named unbanked customers) through its frugal and minimalist digital banking services. Striving for financial inclusivity, in 2015 they launched BTPN Wow!, a platform designed using the mobile phone as a means to deliver financial services and products in a cost-effective way.

Their quest is by no means an easy feat. Uneven infrastructure distributions, low-level education and digital literacy, and numerous systemic problems act as barriers that requires in-depth contextual understanding in a need of innovative services. BTPN Wow! answers that challenge by providing a savings account that can be accessed using any GSM-based mobile phone (not necessarily a smartphone), utilizing the Unstructured Supplementary Services Data (USSD) technology with minuscule data transfer rate that works well even in remote areas where cellphone signals are very weak. A notable pioneer of this technology is the M-Pesa in Kenya, which BTPN also drawn lot of inspiration when developing their own product.

In addition to deploying the proper digital technology, human-centric approach is critical to reach the desired level of inclusivity by stripping the inessentials and focus on what matters most. Since accessing a banking service would be considered an entirely novel touchpoint to most customers, educating and managing customers is key. The system also includes hundred of thousands customer-turned-community by incentivizing “Bank Agents” who constantly reaching out to people in remote areas who have never before had access to banking services and making branchless bank idea possible, serving as many as 4.3 million customers (as of 2017).

With BTPN Wow! and Jenius (millennial-focused digital banking) as BTPN’s flagship investments, the digital-based endeavors finally shows promising results. The lower operational cost and the focus on more quality growth has given a positive mark. The net profit after tax (NPAT) in 2018 surged by 61% from the same period of last year. Jerry Ng, who served as BTPN’s president during those periods, reported this growth were the outcome of digital transformation in the company. “We did not only create digital-based products and services. We also do digitalization in existing business. Now BTPN is more integrated and more focused in fulfilling the customers’ needs quicker, easier and saver”.

Amidst the trend of big data and aggregated analysis using artificial intelligence and machine learning, this human-centric approach on digital innovation shows a number of promising potentials. In February 2019, BCG just released their research report on ‘How Mobile Money Agents Can Expand Financial Inclusion’. The work demonstrates that agent networks can flourish in areas that support healthy numbers of transactions and drives scalability, confirming the practices that BTPN and other financial inclusive services already been doing. These examples remind us that in order to achieve a successful digital transformation, having a proper contextual understanding is as important as developing the technology itself.


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Student comments on Less is more: Digital Innovation for Financial Inclusivity

  1. Very interesting article Hanif, it’s great to see someone with an understanding of the local context working to solve the under-banking problem in Indonesia given it’s particularly large population. As I read the article one thought crossed my mind, is the platform sticky? In a branchless banking world multi-homing costs are not particularly high for users to move their money from one bank to another if they choose. I worry that a large player could decide they want to enter the Indonesia market (possibly because they see the opportunity for profit, or possibly as a way to introduce other services they offer like Tencent of Alibaba) and could possibly capture the network effects BTPN is going after by competing on price (charging no fees, or offering a higher interest rate on deposits). I think it is critical that BTPN create some local multi-homing costs/barriers to entry to pre-emptively keep the global fintech players away should this develop into a profitable segment.

  2. Cool piece! Curious as to whether you see barriers to entry in this space, which would make it more attractive for startups but perhaps less worth the investment for encumbents. Either way, love the human-centric focus!

  3. Great article about financial inclusion! I think the innovation historically has been microcredits, and it’s great to see that financial accessibility is now being extended through digital technology. I would be interested in learning about how it engages with rural populations in Indonesia, especially since this is the segment most disenfranchised of opportunities.

  4. Thank you for your post, Hanif, very interesting!

    It is good to know that the private sector is trying to push further for financial inclusion in developing markets by building innovative business models such as BTPN Wow! However, I wonder about the next steps. While I value the fact that they have created a branchless bank for clients to open a savings account, and all the benefits it delivers (i.e. faster, easier, cheaper and safer services); I consider it only the very first step into real financial inclusion. Probably the most important piece missing in the developing world in this regard is access to credit, but as of today, there are no signs of any progress on this side. Additionally, I am concern about how this branchless bank is educating both their customers and agents so that there is no space for abusive practices when dealing with a less savvy customer base.

  5. Really interesting topic Hanif, thanks for tackling this issue. As you mentioned in your article inclusiveness can definitely be difficult due to barriers such as lack of infrastructure. That is why I really like the idea of them deciding to launch a platform that utilizes GSM, which allows users that don’t have access to a smartphone access to their platform. Also I agree with the company’s decision to take a human-centric approach to drive inclusivity by reaching out to consumers that will not necessarily be inclined to join the platform. One thing I do worry about is the sustainability of utilizing “bank agents” long-term and the effect it will have on profitability. As the BCG report mentioned, the cost associated with the agent model are primarily fixed, so it will be extremely important for BTNP to continue to scale their platform and ensure that agents are generating consistent volume, in order to cover their cost base.

  6. Nice! Seems like a great idea to create sticky relationships with these customers whilst they’re still using simpler technologies, and grow with them as they move towards more advanced smartphones. I imagine it’ll be a tougher fight when more fintech firms are competing for the same user base, once more and more users are on the Android and iOS operating systems – I look forward to seeing how it plays out!

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