February 22, 2024

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Indonesia Government Officially Deploys Blueprint for Banking Digital Transformation

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In providing guidelines and operationalising digital banking, the Financial Services Authority (OJK) has officially released the Blueprint for Digital Banking Transformation. The launching is intended to be a policy milestone in addressing the issues and risks associated with banking’s digital transformation.

The Blueprint for Digital Banking Transformation also aims to set rules for the banking industry, according to Heru Kristiyana, the Chief Executive of OJK Banking Supervision. “We will communicate the newly printed banking blueprint to all stakeholders,” he said today during the virtual introduction of the digital transformation blueprint. According to Heru, over time, traditional banking will be eroded if it does not carry out digital transformation.

OpenGov Asia reported that this blueprint will serve as a policy response to the various challenges and risks associated with banking digital transformation. The blueprint for digital banking transformation, according to OJK Deputy Commissioner for Banking Supervision, is said to be a more detailed description of the acceleration of digital transformation in the Indonesian banking development roadmap.

The fintech industry was still afflicted by a slew of digital issues, including fraud, information hacking via the sniffing method, and money mule schemes in which perpetrators ask victims to transfer money to someone else’s account. The ministry has proposed precautionary measures to ensure that the fintech industry grows in tandem with the bolstering of Indonesia’s digital economy ecosystem.

Moreover, as per Heru, technological disruption has allowed new actors in the financial ecosystem to emerge, such as fintech and others, who may provide services like those provided by banks without having a physical presence. “At the moment, banks are just getting started with digitisation. Even banks that do not wish to move on will be told that it is too late if a new bank opens now. Customers will eventually depart, I believe. But, in my opinion, it is never too late; what matters is that we are prepared to confront the challenges that lie ahead,” he remarked.

This Blueprint is focused on five elements of banking digitalisation development which include:

  • Data covering data protection, data transfer, and data governance.
  • Technology that includes information technology governance, information technology architecture, and information technology adoption principles.
  • Information technology risk management includes commercial bank cyber security and outsourcing.
  • Collaboration that includes sharing platforms, bank collaboration in the digital ecosystem; and
  • Institutional arrangements include funding support, leadership, organisational design, human resource talent, and culture.

These five elements are strategic approaches to encourage banks to develop innovative financial products and services that meet and exceed customer expectations. The Blueprint was developed by considering several factors, including future banking research, banking digitisation conditions, international standards, banking sector best practices, stakeholder involvement, and alignment with key authorities’ laws and regulations.

In addition, aspects of Balance and Neutral Technology are prioritised in this Blueprint. The Balance element aims to strike a balance between encouraging banking innovation while also paying attention to prudential issues to keep banking performance in a safe and sound state. The Technology Neutral element is used to be more flexible in the application of specific technologies to keep up with future advances.

Three main attributes are also presented in this Blueprint. The first step is to accept the Principle-Based idea. This Blueprint establishes guidelines in the form of guiding principles to allow the industry to grow. Second, it adopts a more facilitative approach. The third category is Living Documents. The Blueprint is dynamic, and it will be modified to reflect changes in the banking industry.

OJK’s commitment to promoting digital banking transformation as outlined in several policies before the release of the Blueprint for Digital Banking Transformation, including the Master Plan for the Indonesian Financial Services Sector 2021-2025 (MPSJKI) Pillar 3 and the Roadmap for Development of Indonesian Banking 2020-2025 (RP2I) Pillar 2. Encouraging banks to speed digital transformation while maintaining proper IT governance and risk management.

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