Henry Koenaifi, Director of BCA Indonesia, illustrates how his bank is staying relevant and delivering key support to SME customers through a variety of digital solutions.
2020 has been an outstanding and significant year in which many financial institutions have shown compassion and provided fast first aid packages to their SME clients who were hit hardest by the pandemic. Through a series of articles in the coming months, Efma is highlighting some best practices from banks in different geographies to show how to support SMEs in a time of crisis. BCA Indonesia is one such example. In this interview, we spoke with their Director of Business Banking to better understand what they have done for their SME clients.
Recent reports show that SMEs are considerably weakened by the Covid-19 crisis. What has the situation been like in your country?
In Indonesia, SMEs play a vital role in our economy. They contribute to 61% of GDP, absorb around 97% of employees, and dominate Indonesia’s business unit categorization (around 99% of business units in Indonesia are categorized as SME). SMEs are indeed too big to be ignored, thus they get special attention from the government, particularly during the current economic crisis.
What we are facing today in Indonesia is different from the 1998 Asian Financial Crisis. During that time, SMEs survived and still supported the economy, while big corporates collapsed. In the recent economic turmoil triggered by the Covid-19 pandemic, SMEs in Indonesia, just like anywhere in the world, have been suffering great losses due to the deteriorating economy. The pandemic has abruptly slowed down loan growth of SMEs, and even entered negative growth this year on a YoY basis. SME loan growth recorded -1.9% YoY as of 31 August 2020, not to mention the worsening loan quality as another challenge we face in the SME business. SME Non-Performing Loan ratio crept up to 4%, as of the same period.
Corresponding to the concerning situation, President Joko Widodo made quick and bold decisions to ensure that SME businesses survive through the crisis by launching various stimulus packages. Examples include loan restructuring and relaxations, subsidizing loan interests, providing government guarantees, tax incentives, and other stimulus packages.
What were the immediate first steps that you have taken as a bank internally to cope with the crisis and faster respond to clients?
First and foremost, we have eased our customers’ financial distress by offering them a simple and seamless banking experience, through digital services and sales. Managing customer relationships with less physical interaction is one of the challenges we are facing in the “new normal.” We accelerated the development and enhancement of our digital-based solutions to cater to our clients, for their business and individual banking needs. Some initiatives that we have rolled out include API-based banking for businesses, Payment Link for merchants, and Welma (a wealth management app) for individual banking customers.
In addition, we believe that our employees’ experience shapes our customers’ experience, more than ever during a period of crisis. In order for our employees to keep engaging with our customers empathetically, we need to make sure that employees feel safe in their workplace. We continuously review and update policies to prevent further spread of Covid-19 in the workplace by implementing flexible working hours arrangements, work-from-home policies, travel restrictions, and when possible, switching physical meetings online.
Furthermore, we strengthen the chain of communication between our head office, regional offices and branch offices to ensure that everyone’s concern is immediately addressed with the latest available information. To provide faster responses for our customers, we grant our regional and branch managers higher loan approval limits to speed up loan restructuring processes. We also periodically monitor, review, and update our loan strategy, policies, and procedures to ease the decision-making process in our branch and regional offices, when dealing with challenging debtors.
How are you helping your SME customers face the impact of the covid-19 crisis?
From the transaction side, we make it easier for our customers to perform banking activities without the need to visit our branch office. Our existing digital channels are capable of supporting most of our customer’s banking activities, such as payments, transactions, and investments. Our new customers may even open a BCA account online, through our mobile banking apps or through our HaloBCA (customer service) platform. We have also increased the daily transfer limit of our internet banking to Rp 250 million to cater to customers that are doing large transactions. Our initiatives have been appreciated by our customers, as we are seeing an all-time high growth in new customer accounts from online channels and in digital-based transactions during this pandemic.
From the lending side, we took urgent actions by providing immediate debt relief to distressed customers by offering restructuring programs. We comply and support our government’s regulations by providing restructuring programs such as: lower interest rate, grace period, tenor extension, deferred interest, additional loan, and loan conversion.
Did Covid-19 have an impact on your SME customers’ move towards digital banking? Do you have any figures that might demonstrate this?
Our internal data shows that during the pandemic, average daily transaction volume increased by around 41% compared to the pre-pandemic level – dominated by mobile and internet channels. Online account openings also increased by 3.3x compared to pre-pandemic levels.
As the pandemic became widespread in March, the Indonesian government began enacting lockdowns and other strict restrictions. Borrowing a notion from Charles Darwin, this pandemic has turned the business environment of SMEs into “Survival of the Fittest.” One of the ways for them to adapt to the new normal is turning to digital channels to conduct their businesses.
Moving their business activities to digital channels means shifting payment transactions from cash to non-cash, which eventually boosts the use of our digital payment/transaction platforms.
How have your relationship managers served SME customers during the pandemic? Did you have to change your way of working and do more remote work? Has it been a smooth transition?
We certainly had to change our ways of working – one of them is through remote working. After more than six months, this has become our new normal. At the beginning, we took time to adapt to the new situation. People felt awkward in the beginning, but as time went by, they got used to the new ways of working.
As far as we are concerned, we do not see any problems faced by our relationship managers serving our SME customers. Since the early stages of the transition, our CEO and top management had been keeping an open line of communication with all our staff through internal media. They were showing their empathy to employees, and it has built up strong employee engagement, which consequently strengthens our customer engagement.
More and more banks are launching online tools to help their SME customers to manage their business, transform digitally, and grow. Where do you stand on this point?
We view the shift to digital-based solutions as opportunities. By leveraging technology, we have been able to handle customers and transactions that were previously untapped, through solutions and capabilities such as: online account openings, cash withdrawal from e-commerce apps, and analytical capabilities on loan processing for the mass customer segment.
The pandemic accelerated the shift of SME businesses to online channels. As a result, e-commerce platforms are experiencing enormous growth and we think the trend will continue for quite some time. Some of those platforms are our customers that use our transaction banking solutions, such as API banking and Virtual Account. For our smaller SME customers/merchants lacking the infrastructure needed to utilize such services, we offer the Payment Link product to help manage and reconcile payments received by means of an online platform.
All in all, customers come first. We need to stay relevant to our customers by understanding their needs and offering the right solutions. The key is to leverage our strength in transaction capabilities and continue to expand our business and merchant ecosystems.