Bank Raya zones in on gig economy

INTERVIEW: BANK AGRO Bank Raya zones in on gig economy

By 2025, the Indonesian neobank expects 74.81 million gig workers in the country.

Bank BRI Agro has shed its roots as an agribusinessfocused finance platform and rebranded as Bank Raya, looking to take flight as a fully-fledged digitalonly bank in Indonesia. In particular, the bank focuses on the 46 million Indonesians who count themselves as part of the local gig economy. This number is expected to reach 74.81 million by 2025, and to expand to a market size of US$314b, the bank said.

Whilst many Indonesians held side jobs even before the pandemic, the gig economy truly flourished at the height of this global crisis as mass layoffs pushed workers to explore new avenues of income in jobs that are traditionally seen as side work, Bank Raya observed.

Plans are already in motion. In May, Bank Raya appointed Kaspar Situmorang, former division head of Digital Bank Development & Operations at Bank BRI, as its CEO to lead its transformation into a full-fledged digital bank.

Earlier, the bank also secured regulatory approval, clinching the license to operate as a digital lending platform.

Asian Banking & Finance chats with Situmorang to learn more about Bank Raya’s ambitions of becoming the biggest digital bank in Indonesia and why they have decided to focus on the gig economy.

Before becoming the CEO of Bank Raya, who is Kaspar Situmorang? Can you give a brief background of your experiences in fintech and digital bank development?

For the past few years, I have been assigned to specific fintech positions with banks. Since working with PT Bank Rakyat Indonesia (Persero) Tbk, I have served as the executive vice president of the Digital Center of Excellence for two years. After that, I moved to the role of executive vice president of Digital Banking Development and Operations, where I was in charge of the whole digitalisation of the BRI groups. Since 2019, I have also been fulfilling roles for BRI Venture Capital.

Back in 2018, I started building a new company by the name of BRI Venture Capital. We invested in around 10 fintech firms over a span of two years. One of which is by the name of Agia, which was established in 2018. I was also a part of the Board of Commissioners for the past two years, until April. As you can see I have worked in a wide range of fintech, banking, and, in particular, digital banking roles for the past four years.

Kaspar Situmorang, CEO, Bank Agro

One of the major tasks in store for you is to transform Bank Raya into a fully digital bank. Can you give us a rundown on how you plan to lead Bank Raya through this transformation?

We have to transform the cultures and also the digitals [of

46m Indonesians are part of the local gig economy. This number will reach 74.81m by 2025

the bank]. If you’re using the balanced scorecard models: flip the human capital, flip the business process, and then flip the customers, and then you will get the reflections in the form of a new kind of financial gain. By doing this, we accelerate the journey to becoming the best digital bank in Indonesia.

For the past few years, we have already been investing in Bank Raya. The bank is pretty much ready because we have implemented the application for digital lending, Penang, which is one of the first in Indonesia, back in 2019.

The way we plan to transform it is threefold. The first one is digital, the second part is to digitise. For the third one, we are doing a revamp of the bank as well. So on the digital side, we are trying to amplify the development of super apps within the organisation and also we are trying to simplify the business process to become fully digital, whether it’s for digital lending to micro-businesses, lending to retail customers, and even lending to the consumer side.

On the digitising part, that’s where we are streamlining all the business processes. For example, in loan originations until disbursement and repayment, we try to streamline the processes, so it becomes a new standard. Here, we are also trying to avoid operational risks.

Indonesia Gig Economy Workers

Source: Lee Kuwan Yew School of Public Policy)

Last but not least is the revamp itself. This is where we are working to transform the branch offices. I think you already know that branch offices in Southeast Asia have been shifting. We’ve also recognised this trend, and we are trying to revamp our branch offices into what we call “community branches.” So it’s more streamlined, more specific to an ecosystem, and we’ve got strategic partners also working together with us. By combining our partners from BRF venture capital, some of their fintech has already been invested in by us. Lots of them—Invest Tree, Payfast, Bukalapak—and we are partnering also with Grab.

What can Indonesians expect to see in the transformed Bank Raya?

We’re trying to create a distinguishing factor, a distinguishing characteristic of this bank, which is totally separate from BRI Holdings.

We figured out that there is a specific segment by the name of the gig economy or the informal sector of employment. Luckily, we got platforms providing gig work available in Indonesia like ride-hailing apps, e-commerce, agritech, edutech, healthtech, and also, entertainment tech. All these have been creating opportunities for those people who got laid off during the pandemic. For example, farmers are farming in the morning, then in the afternoon, they could become ride-hailing app drivers, for Gojek or Grab. Then in the evening, they work as resellers or merchants in e-commerce platforms or as shippers of e-commerce products.

So how do we serve them? Through B2B2C or business to business to consumer. We are a digital bank, we are providing our partners which is the platform itself, like ride-hailing e-commerce, and so on. We provide them with our application programming interface (API) to easily open a savings account, to do digital lending; with our open banking platform to do money transfer, opening of virtual accounts, amongst other services.

So far, through Penang, which is our digital lending app, we have already enabled APIs in this product, and we tap it into our partners’ platforms, for example, Payfast, an agent banking platform in Indonesia. So Payfast customers can open up from their apps a Bank Raya savings account. They can just scan their face, provide their digital ID signatures, and a savings account will be opened up in less than five minutes. These kinds of services should amplify the massive scale adoptions to our platforms.

How does Bank Raya plan to become the digital finance hub for the local gig and service economy?

In 2018, we were the first bank to own an open API in Indonesia. Last year, its growth was 390%, and it is closing 55 trillion in fee base. It was 2019 when we started with digital lending by the name of Penang, which in turn taps into Bank Raya. We work together with Tokopedia and it was a massive success, as well. In 2020, we have digital savings.

It goes beyond that. We have also launched the super app in 2020 by the name of BRI BriMo, or BRI Mobile. So at that time, we were thinking about, “How can we transform the industries?”

Everybody’s talking about digital this and that, but we cannot make BRI Holding a purely digital bank because it is too big. So the pinnacle of the digital transformation of BRI Group is Bank Raya becoming a digital bank. That is the storyline.

To be able to scale up, we have to choose a specific segment, as well, that we have already been monitoring under our radar for the past few years, which is Indonesia’s Gig Economy. No other bank in Indonesia has built digital infrastructures around the gig economy. Hopefully, for the next few years, Bank Raya will be the sole bank to build digital infrastructures around the gig economy of Indonesia.

Another goal of Bank Raya is to retire the dusty “banking the unbanked” maxim in emerging Asia. What does this mean?

We try to reframe, reimagine, and reconfigure ourselves every year. For Bank Raya to be specific, we think that it is not our duty to bank the unbanked; or bank the millions of Indonesians who have not got a bank account yet. In that position, the duty of banking the unbanked is the duty of Bank BRI, the parent company.

For BRI Agro, we skimmed this goal down to become more tangible. There are still a lot of people in Indonesia, especially amongst banked people, who need access to financial services. We are talking about the people who got laid off in the last few years, especially during the pandemic. Luckily, the gig economy, as we know, the different tech platforms, all came together to form its economy in the past few years. This has created a new kind of opportunity for us. BRI Holdings does not have a specific focus on the gig economy, because they are very focused on the micro and ultra micro-segments.

In gig economy, the customers are very digital-savvy. They are not just using social media just for the sake of entertainment now – they’ve been utilizing their smartphones to make money out of these platforms. Hopefully, by the end of 2023, we would become the largest provider of financial digital infrastructure, for the 74 million gig economy workers in Indonesia.

The pinnacle of the digital transformation of BRI Group is Bank Raya becoming a fully digital bank

New technologies transform data validation and reconciliations in banking

AI and Machine Learning (ML) technologies improve operational efficiency and decision making for middle and back office.

L-R: Robin Hasson, Senior Product Manager, Reconciliations, SmartStream ,Andreas Burner, Chief Innovation Officer, SmartStream, Vikram Gupta, Executive Director, Head of Technology, Data Science, Automation, Data Analytics and AI/ML, Standard Chartered Bank

SmartStream is conducting pilots to provide high-value AI business cases for the financial industry

The current global pandemic has not just driven banks and financial institutions to up their digital transformation, but it has also compelled them to face the greater demand for data and transaction lifecycle validation, which is spanning higher volumes in more complex areas.

As such, many have been maximising artificial intelligence (AI) and machine learning (ML) to enable financial institutions to take big strides in improving their operational efficiency and decision making. The past years have also seen a significant increase in the use of data validation solutions in the region, especially as an accuracy check needed with the surge in digital payments processing.

Today, the dual challenge brought by the rapid change, as well as the increased volume and complexity, mean event lifecycle validation tools must evolve to take advantage of the AI and ML landscape.

In a recent interview with Asian Banking and Finance (ABF), Standard Chartered Bank’s Executive Director and Head of Technology - Data Science, Automation, Data Analytics & AI/ML Vikram Gupta shared the traditional data and transaction controls and checkpoints that are adopted by financial services firms, as well as the drivers for the increased demand and dependency on AI and ML.

“As a bank, we are really pushing the way we are managing our reference data systems, our sanction screening systems, our confirmation processes, settlements, balancing positions, so all these ecosystems where the data gets generated rigid digital footprint, those are areas which the banking is very much focused on,” he said.

Gupta has also observed that with new business models emerging in banking, customer expectations also change. According to him, customers are now looking for 24/7 operations, personalised services, and all digital.

“In addition, there are areas where we are putting a lot of focus, which are around single control frameworks to ensure we have the right level of oversight and transparency. Lastly, innovation is going to drive the future of businesses and technology advancements such as AI and ML. They are going to be the key differentiator for businesses to succeed in the future,” he said.

AI cuts performance time, human error Meanwhile, SmartStream Senior Product Manager - Reconciliations Robin Hasson pointed out that if stakeholders want to understand where the efficiencies and

opportunities lie, they have to consider today’s challenges in the industry, such as increased volumes, diversity of a wider range of data, which is also more complex.

“All of these challenges mean that the reconciliations tools themselves have had to evolve. And that’s certainly where we’ve invested heavily as a firm into AI and machine learning technologies,” Hasson said.

He also mentioned SmartStream’s latest AI observational learning capability called Affinity, a tool which learns from user interactions, as well as how to correlate and perform user interactions automatically, and mimicking those users automatically. Hasson noted that the efficient simulation reduces the time taken to perform matching types.

“So just by either a few clicks, or by learning from existing historical process data, Affinity is able to simulate that effect, really, very quickly. And that really reduces the time it will take to perform many of these new matching types, whether it’s complex or simple. It can do all of that,” he added.

At the same time, Hasson emphasised that using Affinity will give customers an improvement in accuracy and manage key man dependency, as it can identify patterns. With such capability, it can also manage volumes and complexities that otherwise would take a long time with manual task force.

“You could use your staff more effectively for more strategic or more risk management, risk-focused tasks, because we would expect you to complete the core reconciliations quicker. You will be able to manage breaks earlier and manage any kind of risk and exposure much earlier in the day. So that’s a high level, that’s where I see benefits,” Hasson said.

Gupta added that banks like Standard Chartered are interested in the adoption of AI and ML as they have big data everywhere.

“I mean, we are talking about millions of transactions, thousands of flows, and, and it becomes a natural fit for AI and ML, to drive future efficiencies and increased revenues. And our bank, we are applying AI to grow new areas of business, to tap customers, markets, to streamline our operations, to build efficiencies, and we are accelerating our digital transformation journey and automating our operations,”

SmartStream’s Affinity learns from user interactions and mimicking those users automatically

he said.

Accelerating digital transformation in banking

To aid in this change, SmartStream’s Innovation Lab based in Vienna, Austria, has been conducting pilots to fast track and prove high-value AI business cases for the financial industry. SmartStream Chief Innovation Officer Andreas Burner said that to do this, they work with their largest customers and create a team where their customer provides the business know-how, and the data scenarios.

“Our target really is to allow quicker processes, better data enrichment and to help the financial services industry to improve their processes,” Burner said.

He added that the Innovation Lab was launched to address big business problems in the industry, an area where AI thrives.

“AI is a solution to have better control for the financial services industry, to reduce the costs and to really gain more efficiency,” Burner said.

However, he said that building a product and getting AI into production takes time as it has to work in many ways, be stable, and be sustainable. “SmartStream has done that for many years, so we know how to build that. But what is interesting is that with AI and ML technology, new things come in,” he pointed out.

Burner noted that there are instances where AI technology learns something in production that it is not meant to.

“In general, AI and ML technology is very robust. If people make mistakes, if you do things a thousand times, and one time you do it wrong, it would not mind. It would learn from the other thousand times,” he said.

Hasson added that what is really important is to be able to integrate AI and ML technologies into the products as seamlessly as possible.

“When the users are seeing the information that comes from that as a prediction, it feels very natural. And as part of the workflow and the process flow, there’s no interruption, so it continues to be a standard cycle. But it makes use of these new capabilities, gets the enrichment, gets the predictions and the benefits of machine learning as part of the standard cycle,” he said.

Lessons in adopting AI and ML

Burner also revealed that adopting AI and ML capabilities into their solutions enabled them to more easily identify business problems, find API capabilities, recruit the right experts, increase awareness of the fintech space, and start discussions on product development.

“So there are a lot of things that are changing at the moment. And I think it’s very interesting to see how users respond to that. And they see a lot of benefit, but they also see that they need a lot of confidence from the software and guidance from the software to allow that automation,” he said.

Gupta noted finally that infrastructure requirements for AI deep learning should also be addressed.

“It is very important to have the right suite of technology and tools, and the right governing process is going to be the biggest

Innovation is going to drive the future of businesses and technology advancements such as AI and ML. They are going to be the key differentiator for businesses to succeed in the future