Author: Lani Darmawan, Consumer Banking Director, CIMB Niaga Bank – Indonesia
February 19, 2021
The banking sector has usually demonstrated resilience within the wake of devastating crises. However, in 2020, a 12 months characterised by the COVID-19 pandemic, it is about survival. With earnings on the decline, non-performing loans on the rise and return on fairness plunging, banks are specializing in weathering the disaster within the speedy future. In the medium and long run, technique is being anchored on adaptation with digital transformation on the core. This is elegant on the truth that COVID-19 has outlined a ‘new regular’.
For CIMB Niaga Bank, Indonesia’s second largest privately owned financial institution by property, the state of affairs is no completely different. The want to resist the impacts of the pandemic is paramount. But the financial institution has not shifted focus from its Forward 23+ technique centred on buyer journey, digitalisation, enhancing productiveness and discovering new alternatives. The technique, which is a part of the bigger CIMB Group plan, is designed to make sure CIMB Niaga joins the rank of prime banks within the ASEAN area.
Due to this ambition, CIMB Niaga Bank, which is majority owned by the Malaysia-based CIMB Group, is strategically positioned to help purchasers and companies affected by the disruptions which have been pressured on the banking sector by COVID-19. The financial institution has a sturdy footing. It has been in operation for over 65 years. It boasts a wide-range of banking services, each standard and Sharia. With a community of 390 branches, 34 digital lounges and 27 cellular branches, the financial institution has over 12,000 workers.
CIMB Niaga intends to climate the challenges introduced upon us by the pandemic from this agency basis, but additionally goals to anchor future progress. This is vital, and for good motive. Indonesia, Southeast Asia’s largest financial system, is among the many international locations which have been badly affected by the pandemic, each instantly and not directly. At the tip of November 2020, the nation had 522,581 COVID-19 confirmed instances with 16,521 deaths. Economically, the impacts have been extreme, forcing the nation into a recession. The final time this occurred was throughout the 1998 Asian monetary disaster.
Since 2014, Indonesia’s gross home progress has averaged 5 p.c per 12 months, rating it among the many quickest increasing nations. This 12 months, nonetheless, most sectors of the financial system together with transportation and warehousing, monetary providers, manufacturing, tourism, building, mining and building are on a downward spiral. The wider impact is that Indonesia is headed for unfavourable progress this 12 months. Worse nonetheless, the World Bank is projecting an “uneven and risky” restoration within the coming years.
As the heartbeat of companies, the banking sector is feeling the devastating results of the pandemic. In the interval ending September 30, 2020, the seven prime banks in Indonesia posted a median decline in profitability of 29.7 p.c. This is consistent with the nation’s Financial Services Authority (FSA) revised forecast, indicating that earnings would decline by round 30 to 40 p.c on common in 2020.
Robust fiscal planning
Amid the powerful working surroundings, CIMB Niaga continues to display a spirit of neighborhood and energy. For the financial institution, most indicators stay sturdy with liquidity, asset high quality and value administration being central within the financial institution’s means to resist the present disaster. This is mirrored within the monetary outcomes for the nine-month interval main as much as September 30th. During this era, CIMB Niaga’s capital adequacy ratio remained sturdy at 20.eight p.c whereas complete property stood at IDR 281.7tr ($15.4bn). This ensured the financial institution maintained its place as Indonesia’s second largest privately owned financial institution by property.
While the efficiency of the standard financial institution stays stable, CIMB Niaga Sharia maintained its place as the most important Islamic enterprise unit in Indonesia. The unit’s complete financing was valued at IDR 32.6tr ($2.3bn) with deposits growing to IDR 35.1tr ($2.4bn). Notably, CIMB Niaga is one of many Sharia banks that has embraced digitisation. This allows the financial institution to help the burgeoning wants for high quality Sharia-based merchandise in a nation that is predominantly Islamic.
In Indonesia, the FSA has predicted a muted progress in loans and advances. But this has not stopped CIMB Niaga amassing a sturdy mortgage e book that stands at IDR 180.9tr ($12.8bn), contributed to by a 4.1 p.c year-on-year progress within the consumer-banking phase. Total deposits, then again, stood at IDR 211.9tr ($15bn). During the interval, the financial institution posted a internet revenue of IDR 1.9tr ($134.5m). Although the web earnings have been 31 p.c decrease in comparison with the IRD 2.6tr ($184m) realised in 2019, they represented the financial institution’s willpower to navigate the disaster. This is evident on many fronts. Despite the pandemic having widespread disruptive results, significantly on service supply, CIMB Niaga has actively responded with digital transformation being central to making sure enterprise continuity. In reality, COVID-19 didn’t convey in regards to the want for digitisation for CIMB Niaga. The financial institution, which was established in 1955 underneath the title Bank Niaga, was based on innovation and a forward-thinking philosophy.
Years within the making
CIMB Niaga was the primary financial institution in Indonesia to put in an automatic teller machine (ATM) and to launch a mobile-phone eWallet. In 2017, the financial institution appropriately predicted that the banking sector within the nation was ripe for accelerated digital revolution. To be a chief on the digital frontier, the financial institution deployed important sources to roll out an bold technique that is redefining service supply within the midst of the pandemic. For most banks, the digital transformation has been a mandatory evil caused by COVID-19. For CIMB Niaga, nonetheless, it is a well-thought-out enterprise technique. As the financial institution delivers the enhancement on digital channels, it has at all times remained passionate and interested by new and highly effective strategies. This contains the ‘design first’ considering course of that challenges the established order and invents new methods of doing issues, in addition to agile methodologies that velocity up undertaking and options supply.
Other strategies embody fixed benchmarking and studying from rivals, reducing throughout native, regional and worldwide boundaries, conducting surveys to find extra in regards to the buyer and being true to the Kaizen idea of fixed and unending enhancements. The outcomes of the aware method to digitisation have been important in avoiding service disruption particularly contemplating Indonesia has witnessed main lockdowns to comprise the unfold of the illness.
To begin with, CIMB Niaga has been in a position to leverage the COVID-19 pandemic as a chance to seamlessly redirect clients to digital channels like OCTO cellular and OCTO Clicks on-line banking. It has additionally inspired clients to utilise its cost capabilities and cashless transactions. These embody QR transactions that permit clients to transact with out playing cards, and likewise our OCTO merchandising machines distributed to key areas throughout Indonesia. With adoption of on-line platforms to work together with clients, the financial institution has been in a position to attain extra clients.
In reality, the platforms have been ultimate contemplating the geographical perspective of Indonesia, a nation that consists of many islands. More importantly although is the truth that CIMB Niaga is on the forefront of the nation, when it comes to taking part in a central function within the projected e-commerce explosion. Numerous surveys present the web financial system and e-commerce may attain $35bn this 12 months, up from $23bn in 2019, and is on observe to cross the $130bn mark by 2025.
Internally, adoption of digital channels by CIMB Niaga clients has been swift. The financial institution is recording larger penetration charges on cellular banking, one thing that is mirrored by a important improve in digital transactions which can be in extra of 96 p.c of the entire yearly transactions processed by the financial institution. Financial transactions have additionally elevated by virtually 50 p.c whereas lively customers have additionally grown considerably (see Fig 1).
Pushing issues ahead
The financial institution has extra bold 2021 targets because of the sturdy progress seen. Over the following 12 to 24 months, CIMB Niaga will likely be specializing in perfecting its digital financial institution capabilities and strengthening its foothold enlargement to be a really digital financial institution. Already, it has carried out a number of thrilling initiatives. These embody a digital OCTO financial savings account and bank card set for launch subsequent 12 months. Concurrently, a crew is engaged on constructing the preliminary frameworks to proceed the enlargement to a extra sturdy app for its cellular banking. This 12 months alone, the crew may have delivered over 74 options on cellular, offering extra conveniences and options to customers. Of significance although, is that CIMB Niaga is placing safety on the core of its digital networks.
On this, the financial institution is not solely compliant to trade requirements however has methods to observe, detect and forestall fraud. Its OCTO cellular coverage carried out in 2017 has, as an illustration, lowered instances of fraud to document low ranges. For CIMB Niaga, the imaginative and prescient to enterprise into the digital house was a masterstroke. This is as a result of as COVID-19 forces different banks to speed up the digital transformation, CIMB Niaga has already responded to buyer wants. But even because it continues to roll out improvements and options that conveniently bridge monetary and on a regular basis life for customers, the financial institution is cognizant of the truth that it can not afford to lock out conservative clients who nonetheless imagine in bricks and mortar.
Notably, branches will nonetheless be obtainable for any such buyer. However, the truth that the numbers are on a decline has seen CIMB Niaga proactively proceed educating clients on its digital capabilities and conveniences. The outcome has been quicker transition into the digital house. For clients who’re maybe extra apprehensive, the financial institution’s relationship managers are good versed in digital onboarding. This makes them prepared to help purchasers once they really feel comfy and able to flip to digital.