Indonesia prepares for comprehensive branchless banking

It opens more opportunities for Indonesians.

Currently, Indonesia's branchless bank services include automated teller machines, online banking and mobile banking.

Such services were not sufficient to provide formal banking services to Indonesians, as opening bank accounts still requires stepping into a branch.

“Current regulation still requires the customer to come to a bank branch for opening an account,” said Budi Gunadi Sadikin, micro and retail banking director at Bank Mandiri, adding that limited time and difficulty accessing branches dissuades customers from using banks.

To address the need, Bank Indonesia is set to introduce new regulations early next year.

Budi explained that the new branchless scheme allows banks to recruit bank agents, who could be equipped only with a mobile phone to provide banking services.

Post offices, shops and cell phone voucher vendors could act as the banks agents, Budi said, as the central bank only requires the agents to be legal business entities.

“Customers can conduct banking activities as simply as buying phone credit in shops,” Budi said.

Indonesia wants to emulate the success of Kenya, which in 2007 launched a mobile money service that allowed Kenyans to buy groceries, withdraw cash and start building savings. The service outreach soared to 75 percent of the country’s 37 million people within three years.

Mandiri is ready to launch agent banking after BI establishes the rules next year.

Bank Rakyat Indonesia may also introduce branchless banking within a short time, according to finance director Achmad Baiquni.

On the other hand, Bank Negara Indonesia was less eager sinc the scheme still lacks a clear business model, investments and legal certainties, said Yap Tjay Soen, BNI finance director.

“This kind of banking only has a catch with younger generation,” Yap said. “The older ones, who in fact have most of the money, still need to see our building.”

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