#1☐ ☐ ☐ Winning financial services in Indonesia 2023 State of Indonesian banks ☐ 00 00 twimbit 00 ☐#2Market overview Victory Indonesia annual GDP growth is at 5.7%. Banking and financial services contribute 6.8% - 7.2% to the GDP ~> USD 109.8 billion assets for top 6 Indonesian banks in 2022* Fee-income to revenue contribution is at an average of 15% -28% ICT spend to revenue is on average 3% for top 6 Indonesian banks. BTPN has the highest at ~4.4% Over 72 million digital banking users for top 5 Indonesian banks USD 42.9 billion from e-commerce transactions through e-wallets Source: Industry reporting, annual reports and investor presentation * BTPN, Bank Mandiri, BNI, BCA, BRI, Bank Danamon twimbit#3A closer look at Indonesian banks vs best in class APAC banks twimbit purpose index Growth Score (Revenue Growth) Canara Bank ABC Alliance Bank HDFC Danamon BTPN Kotak Bank BNI BRI CIMB BOQ CCB ICBC BOC Bank Mandiri HLB Profitability Leader Above Avg Below Operating revenue size ABC UOB ANZ Agricultural Bank of China Australia and New Zealand Bank BCA Bank Central Asia OCBC BNI Bank Negara Indonesia BOB Bank of Baroda ICICI CBA BOC Bank of China SCB BOQ Bank of Queensland BRI Bank Rakyat Indonesia ANZ CBA Commonwealth Bank BCA CCB China Construction Bank HLB Hong Leong Bank ICBC Industrial and Commercial Bank of China. Public Bank NAB DBS NAB National Australia Bank UOB United Overseas Bank BPI Bank of the Philippine Islands SCB Siam Commercial Bank BAY Bank of Ayudhya BTPN Bank Tabungan Pensiunan Nasional Maybank Purpose Score (Employee Experience, Customer Experience, Supplier Satisfaction and ESG) twimbit#4Average revenue growth by Indonesian banks. Group Operating Revenue (IDR Tn), 2022 BTPN Bank Negara Indonesia Bank Rakyat Indonesia Bank Mandiri Bank Central Asia 17.2 USD Bn APAC average 79.48 87.47 124.65 133.4 USD Bn ICBC Best in class Fee Income to Total Income (%), 2022 Net Interest Margin (%), 2022 BTPN 18.65 Bank Negara Indonesia 4.8 Bank Rakyat Indonesia 28.22 Bank Mandiri 5.4 Bank Central Asia 5.3 167.08 BTPN 11.73 Bank Negara Indonesia 173.47 Bank Rakyat Indonesia 10.65 Bank Mandiri Bank Central Asia 18.96 Source: Industry reporting, annual reports, investor presentation, twimbit analysis Note: Figures for BTPN pertain to FY21 whereas figures for other banks pertain to FY22 14.9% 26% APAC average SCB Best in class 3.2% 7.8% APAC average BRI Best in class 6.4 7.8 twimbit#5Despite achieving strong operational performance Non-Performing Loan Ratio (%), 2022 BTPN Bank Negara Indonesia Bank Rakyat Indonesia Bank Mandiri 1.88 Bank Central Asia 1.7 1.73% 0.17% Capital Adequacy Ratio (%), 2022 CASA Ratio (%), 2022 25.01 BTPN Bank Negara Indonesia 24.5 Bank Rakyat Indonesia Bank Mandiri 25.8 Bank Central Asia 2.65 BTPN 2.8 Bank Negara Indonesia 17.5 2.82 Bank Rakyat Indonesia Bank Mandiri 18.36 Bank Central Asia 15.5% 25.8% 42% APAC average Bendigo Bank Best in class Bank Central Asia APAC average Best in class APAC average Source: Industry reporting, annual reports, investor presentation, twimbit analysis Note: Figures for BTPN pertain to FY21 whereas figures for other banks pertain to FY22 34.5 81.9% 72.4 66.7 Bank Central Asia Best in class 73.4 81.9 twimbit#6Because high OPEX puts pressure on profitability Cost Efficiency Ratio (%), 2022 Cost of Credit (%), 2022 BTPN BTPN 63.2 Bank Negara Indonesia 42.6 Bank Negara Indonesia 1.5 Bank Rakyat Indonesia 41.33 Bank Rakyat Indonesia Bank Mandiri Bank Mandiri 38.19 Bank Central Asia Bank Central Asia 0.7 33.9 40.4% 30.1% 1.26% APAC average Bank of China Best in class APAC average Source: Industry reporting, annual reports, investor presentation, twimbit analysis Note: Figures for BTPN pertain to FY21 whereas figures for other banks pertain to FY22 ICT to Revenue (%), 2022 2.5 BTPN Bank Negara Indonesia 2.8-3 1.9 Bank Rakyat Indonesia 2.8-3 1.8 Bank Mandiri 2.4-2.8 0.68% Bank Central Asia 3.85% 9.3% Bank of China Best in class APAC average DBS Best in class 2.8-3.3 4.41 twimbit#7Banks must become digital leaders to derive future growth from fee-based income 30% of Bank Mandiri's fee-based income comes Livin, Kopra and other digital channels Fee Based Income (IDR Tn), 2022 35.18 Fee based income 2021 2022 YOY Loan Related Fee 2,467 3,067 24% Deposit Related Fee 3,307 3,707 12% Credit Card 1,164 1282 10% 16.58 18.47 14.82 Mutual Funds & Bancassurance 845 855 1% Recurring Kopra Fee 1,946 2141 10% fees 1.95 ATM 617 480 -22% BCA Bank Mandiri BRI BNI BTPN Livin' App, SMS & Internet Banking 1,432 1737 21% Other E-Channel 793 1147 45% Most Indonesian banks report fee-based income based on transactional fees than income from integrating third-party sources Fixed Income, FX & Derivatives 7,119 4580 -36% Non Cash Recoveries 4,705 6339 35% Recurring fees Other Income 840 1669 99% Subsidiaries Subsidiaries 7,035 8175 16% Consolidated total 32,273 35,180 9% Source: Industry reporting, annual reports, investor presentation, twimbit analysis twimbit#8.H 0 w % 血 CO Indonesian banks today ⚫ twimbit Purpose Scores • Best practices by Indonesian banks twimbit#9twimbit purpose scores for top 5 banks in Indonesia mandırı GRUP BCA BCA XBNI BRI bank btpn Benchmark score (CX, EX, ESG, SS) 3.52 3.45 3.40 3.19 2.8 twimbit#10.H 0 w % 血 CO Top initiatives by Indonesian banks twimbit#11Bank Mandiri has two different SuperApps Comprehensive Banking Experience All banking services controlled in your hand . Digital Ranked 1st Ap in financial category 1. Bank Mandiri has two SuperApps, retail and business to serve the different customer segments 2. 3. Livin' mobile banking application has been downloaded by 22 million Indonesians with up to 16 million active registered users. This increase in the number of users contributed to a fee-based income. Kopra also recorded up to USD 1.35 trillion wholesale digital transactions. Play Beyond Lending Strategy Value Chain Trade & Guarantee BSI ■ Digital Customer Service mancar Teller Digital Sales livin mancs mand europe manden health Tisket CH C Open Ecosystem Integration with best customer lifestyle ecosystem kopra kopra by mandiri ($)- Cash Mgmt Online Custody Full-suite Financial Services Complete financial services from insurance, investment and consumer financing -7.5 Mn Downloads since launch (Oct. 21) 35% entirely new ti the app 65% shifted from old app Smart Account E-FX livin #1 SuperApps GOAL Becoming the Main Operating Bank For Business Clients Fee Based Income Growth CASA Growth Value Chain Enabler Improbed Asset Quality twimbit#12BCA steps towards branchless banking with digital only bank - Blu #2 Digital banking 1. As of December 2022, Bank Digital BCA recorded total assets of USD 1.11 billion 2. The app has more than 1 million active customers. This is generating significant fee income for the bank. Transaksi Berhasil 30 Jul 2021 16:00:09 WIB 3. 4. Blu has collected third-party funds of USD 0.69 billion as of December 2022. Blu provides features such as: Nominal Transfer Rp 1.000.000 Buat Jalan BCA Utta BCA-0123456789 Tipe Transaksi • bluAccount online bank account opening . • bluSaving - manage budgeting with 10 saving accounts bluGether utilize saving account functions like a treasury account ― • bluDeposit - for easier deposit top-up No Ref Detail Transfer Online 50948503945803 Simpan Sebagai Favorit Kembali ke Beranda twimbit#13#2 Digital banking Jenius by BTPN revolutionised banking in Indonesia by being the first digital banking app Jenius 12:30 Jenius Total Wealth Equivalent to IDR IDR 500,000,000 Active Balance IDR 800,000 Add Move Send Balance Balance & Pay H Pay Jenius 19.1 Mn+ downloads 4661 5678 1234 5678 1834 18497 04/18 FEBRI RUSLI ~4.2 Mn+ VISA DEBIT Product stack #1 Clarity of information Availability of all account types on app Connect to e-money Paylater and Flexi Cash -> Flexible fund, Online loan of up to IDR 50 million, Credit card Foreign exchange (forex) transactions with Rupiah at Jenius Forex QRIS Payment Savings account in 7 foreign currencies (3 a/c opening options) Mutual Fund Product • Document requirement and a/c opening procedure Eligibility for a/c opening . App should provide user with clear information before asking to register #2 Ease of account opening The verification code to the cell phone number and email sometimes arrives late • 5-step account opening journey • Questions like source of funds, purpose of funds increase steps • No-option to auto-save information if user leave the process in-between #3 KYC authentication KTP and Selfie upload . In case of video-KYC, there should be option to schedule it later • • Long wait time to confirm KTP Does not allow biometric verification during the a/c opening process #4 Time to activate an account Jenius Moneytory active users • Account gets activated instantly • Instant activated virtual card just after the a/c opened twimbit#14#3 Embedded finance BNI has the largest API stack in Indonesia, enabling banking-as-a-service solutions for partners BNI Open API https://digitalservices.bni.co.id/ BNI API BNI Sign Up, Sandboxing and Start Your Business Png for your bes BNI API has a total of 443 services, the most compared to peers Utilized by 4000++ partners »Recognized Globally Present the comprehensive offer of the ecosystem through a platform Play pivotal role within ecosystem by providing an integrated holistic solution, such as government, education, health, commerce Use the partner's platform as a channel to sell bank's products Partner with e-commerce, lifestyle companies to sell deposits, loan products Provides services to the partners so they can potentiate their products Customize bundled solutions into new products in collaboration with partners 2020 DEVPORTAL AWARDS Won the Best Overall Devportal - Community Prize in 2020 https://devportalawards.org/winners BNI SMART CITY BNI HuPATACL BNI ECO- Xpora Thapar jadi mudah SPE MEDIGO PINTAR ALKES traveloka Bukalapak PayLater Link Ajo! tokopedia gojek xendit RU Grab twimbit#15#3 Embedded finance BRI is building the fastest growing API ecosystem for data monetisation BRI apı Ecosystem/API Digital Partnership Model to connect with Fintech and create digital ecosystem. Already more than 220 partners using BRIAPI. Transportation Ecosystem Healthcare Ecosystem THEFITCOMPANY halodoc gojek Grab Quala kargo PORTER BRI ap DOOGETHER DLANBAUR TANPA BATAS Fintech & E-commerce tokopedia ayopop modalku Bukalapak Agri Ecosystem Grow TaniHub LAZADA savurbox investree Link Aja! redkendi DANA Oil & Gas Ecosystem; Education Ecosystem; etc ceria Ceria Ecosystem Ciril Cepat Cara Partnership BRI also establishes partnership with Indonesia's top digital platforms to reach out and tap the untapped. KUR Disbursement Partnership* Shopee tokopedia gojek Grab بيب ModalRakyat *Partnership with E-Commerce & Ride Hailing Application Through partnership with Investree and Amartha, BRI became the first Institutional Lender. 436.9 Bio investree disbursement amartha 1.2 Bio disbursement Fintech BRI ventures Through BRI Venture Capital, BRI is actively investing and facilitating Indonesian start-ups and fintech that synergize with BRI. TaniHub ayoconnect modalku investree Awan Tunai PAYFAZZ Link Aja! N NIUM Non-fintech BRI prepared Sembrani Nusantara funds for BRI Venture Capital to invest in non-fintech MSMEs for their market expansion as well as strengthening BRI's MSME ecosystem. BRODO haus! semua berhak minum enak twimbit#16.H 0 w % 血 CO Challenges faced by for Indonesian banks twimbit#17The industry challenge of cost efficiency and revenue growth $ LI ( COST #1 High cost to serve The cost efficiency for the banks are quite high going up to 63%. This creates pressure on the profitability for the banks. #2 Low fee-based income The banks need to focus on improving their fee-based income if they want above average revenue growth. The scope for increase lies between 8-15%. #3 High ICT expenditure The banks are investing up to 4.5% of their revenue into ICT but are unable to realise solid returns from this expenditure. tuimbit#18.H 0 w % CO 血 Grow fee-based income with continued focus on digital adjacencies Digital only banking • Embedded finance • SuperApps Sustainable phygital experiences twimbit#19#1 Frictionless digital banking proposition for elevated CX ~38% Unbanked population in Indonesia 55% Non-digital customers ready to move to digital offerings 14% Contribution of digital economy to the GDP 45% More engagement on financial services through mobile Micro credit • • Indonesian banks have digital only offerings in the form of 'Livin', 'BNI Mobile', 'BRImo', 'Blu' & 'Jenius'. All offerings are contributing well to the banks' revenue and cater to over 72 million users The banks can further enhance their offerings by: Improving their onboarding process with simple and intuitive steps Credit Score O Insurance Digital Identity/ Documents Wealth Management Source: Empowering Indonesia 2023 report Savings Biometric Information Credit/Debit Cards • Minimise the steps taken for KYC authentication • ● Provide instant account activation or utilise the time taken for activation to show promos and offers to the customers Enhance the customer journey with hyper-personalisation and gamification the offerings engaging and fun Upgrade their existing product stack to include more embedded finance offerings such as insurance, wealth management, loans, etc. Detailed analysis to improve digital only banking experience - here. twimbit#20#2 Create a partner ecosystem to expand embedded offerings Over 70 million customers acquired by digital banks in 2022 Average 10%-12% CASA growth Reduce cost burden of distribution and acquisition API-led partnerships across POS terminals, payments, micro ATMs API-driven integrations leads to 50% higher conversion rates For banks, embedded finance represents a significant opportunity to expand their fee income by leveraging the customer reach of non- financial partners. By offering customized financial solutions through these partnerships, banks can tap into new revenue streams and deepen their customer relationships. Indonesia has an unbanked population of ~38%. Banks can drive financial inclusion through embedded finance solutions. They can introduce the following solutions in the market to achieve this: Source: twimbit analysis, industry reporting . • An integrated, end-to-end, retail lending solution (for mortgage, automotive, education, etc.) covering all facets of loan lifecycle from sourcing to disbursement for all kind of customers. It can be a unified interface for customers, third party providers and sourcing channels. A merchant ecosystem (for grocers, supermarkets, small retail store chains, online businesses and e-commerce firms) which provides banking solutions and value-added services in one place. twimbit#21#3 Rise of integrated experiences will lead to SuperApps Leisure & Entertainment E-Hailing: Food, Transport, Grocery, Parcel E- Wallet Digital Bank E-Commerce Digital Investment Tele-Health Micro- lending Insurance Superapps are racing towards user cross pollination within the ecosystem More than 30% 2% Customer transactions are outside of a bank's platform Gojek's contribution to GDP, led to regulatory support for superapps Source: Empowering Indonesia 2023 report . Bank Mandiri has 2 different SuperApps for different customer segments, contributing about 30% to the bank's revenue. SuperApps have significant potential for generating new revenue streams and increasing cross selling for the banks. They can further help the banks by: • Providing a seamless CX at lower costs as they will streamline day to day financial functions onto one platform while also lowering operating costs and providing access to new data sources. They will also enable the banks to improve their data management and analytics capabilities and create a single source of truth for all business lines. This will help banks to develop a better view of the risks involved, while also helping them to create targeted financial products for each customer Banks will be able to focus their efforts towards forging longer-term relationships that will boost customer acquisition and satisfaction. twimbit#22#4 Drive phygital experiences in a sustainable way B E For example: ANZ bank branch in Australia is built on the ESG concepts to reduce emissions, create a healthy environment, and encourage a place to co- work and co-create WELCOME TO KNOX 8:48M FRIDAY 10 DECEMBER • • • • Indonesia has a large population of 277.5 million The top 5 Indonesian banks have a branch network of 7157 branches amongst all of them Some of them have phygital branches such as Bank Mandiri, BCA and BRI All 5 banks are planning to expand their branch network. This will increase their cost to serve and deviate from the banks' efforts towards sustainability. The banks should follow the footsteps of ANZ bank and build new branch designs built using low carbon footprint, sustainable materials. This will provide the banks with flexibility to remodel and scale their branches in a cost-effective, low-waste manner based on the environment and changing needs. They can also use branch technology infrastructure which can be disassembled, relocated, and reused as well. twimbit#23tuimbit be more Insights Immersions Challenges How can we help? [email protected]