Adoption of Generative AI (GenAI) by banks in Indonesia has been surprisingly rapid even though it is still in the early stages of implementation, according to a new report by AC Ventures, Boston Consulting Group (BCG), BCG’s tech build and design unit BCG X, and the Indonesian Chamber of Commerce and Industry (Kadin).
The report, titled ‘Harnessing the Power of (Gen)AI in Indonesian Financial Services’, was based on a survey of 41 business leaders from financial institutions in the country and interviews with five fintech startups.
The report will contribute to the white paper on economic development and policy directions for 2024-2029 that is currently being prepared by Kadin.
According to the survey, 85% of respondents expect improved operational efficiency by integrating GenAI into their work while 76% expect enhanced customer experience and 66% expect innovation in products and services.
“Considering GenAI has only been in the market for two years, its rapid adoption by traditional financial institutions, even within a highly regulated industry, underscores how seriously these businesses are taking the technology,” the report said.
The report noted that all mid- to large-sized financial institutions surveyed are at least piloting GenAI with a majority having implemented a few use cases at scale for customers or employees.
Still, business leaders have yet to realise the full benefit of GenAI for their core business. According to the survey, nearly half (49%) of them see customer service as the primary application for GenAI and 34% already see tangible benefits from its deployment.
While helping established lenders improve efficiency, the report also noted that the AI and GenAI boom helps fintech startups lower barriers to entering the country’s financial services sector.
AI and GenAI also blur the lines within the fintech ecosystem, allowing SaaS companies to move into the fintech space.
For example, Indonesian restaurant tech startup Esensi Solusi Buana (ESB) has transitioned from a restaurant SaaS platform to facilitating loans by leveraging transaction data to assess credit risks more effectively
“With the use of our products and the data it generates, we managed to create some sort of AI that can create an internal credit scoring,” Gunawan Woen, ESB co-founder and CEO, told DealStreetAsia.
“Internal credit scoring that we create is different than others. Banks usually do credit scoring before handing out loans. ESB users, with our AI that keeps on harvesting data every day from transactions and payments, we can create a running credit score,” Woen said.
ESB started as an ERP (enterprise resource planning) solution provider in 2015 before focusing on the F&B business in 2018. Today, it offers various SaaS offerings, including point-of-sale, ERP, mobile ordering system and digital payment services to 20,000 restaurants in Indonesia.
AI for Indonesia
Not only beneficial for Indonesia’s financial sector, the use and development of artificial intelligence (AI) may also take part in the country’s aim to reach the targeted 8% economic growth, a top executive said during the launch.
Pandu Sjahrir, a founding partner at AC Ventures and the department head of economic and financial technology at Kadin said efforts to reach such rapid expansion boil down to investment and foreign direct investment.
Sjahrir referred to Indonesia’s President-elect Prabowo Subianto’s target of becoming the world’s fastest-growing economy early in his term.
Indonesia’s economy expanded 5.05% last year and it is expected to grow around 5-5.2% this year.
“We need to fill the 3% gap,” Sjahrir said. “Today, the most significant capital that wants to invest related to anything—outside the energy transition—artificial intelligence. Whether it is the buildup of digital infrastructure, anything related to cyber security, and from revenue side is the usage of AI.”
In a separate statement, Sjahrir also noted how Indonesia’s incoming administration can learn from the private sector’s experience with AI and GenAI implementation.
“With the incoming administration looking to build sovereign AI, there’s a push to enhance regulatory frameworks and accelerate investment in local infrastructure for GenAI development,” he said.
In a corresponding press conference, Sjahrir said the country requires sustainable data centres powered by renewable energy, strict privacy laws, and strong public-private partnerships. He made a rough estimation that Indonesia needs at least $20 billion in investments only for digital infrastructure.
