Citi to co-exist, co-create with Indonesian fintech industry – Business
Stella Kusumawardhani – Tenggara Strategics (The Jakarta Post)
Wednesday 23 November 2022
After selling its retail business in Indonesia, Citi is now focusing its services on institutional clients to go through a business transformation and accelerate digitization in the country to take advantage of the potential exponential growth of the country’s digital economy.
Citi managing director and global co-head of payments and receivables Amit Agarwal said in a recent interview that Indonesia’s digital economy and its growth is still at an early stage, with cash transactions still dominating. Over the next five years, the size of the global digital economy is likely to grow significantly.
The payment report from Worldpay shows that most e-commerce transactions in Indonesia last year used digital/mobile wallets at 39 percent, followed by bank transfers at 23 percent. This is starkly different from physical point-of-sale (POS) transactions, which mostly relied on cash at 51 percent, followed by digital/mobile wallets at 19 percent. Cash payment is still a big part of Indonesia and therefore there is a lot of room for innovation.
As a strong global bank, Citi wants to be part of the innovation and growth by focusing its services on institutional clients, including financial technology (fintech) companies, by offering seamless payment support through its global payment network.
“Fintech companies use us to provide payment services to their customers. We also partner with fintechs to build solutions for our customers. So with fintech, we co-exist and co-create,” Agarwal said.
Citi does not see fintech as a threat to traditional banks. Each traditional bank and fintech brings certain assets and strengths that, when put together, can provide better solutions for customers. Fintechs will bring the customer experience, while financial institutions provide the regulatory framework. Payments are a highly regulated money movement activity. Just because the technology is disrupted does not mean there is no regulation for fintech as traditional banks have knowledge of the regulation. Traditional banks are partnering with fintechs.
There are similarities between the payment industry globally and in Indonesia. As in other countries, Indonesia is focusing on old to new, such as digitizing retail payments, wholesale payment infrastructures and Real Time Gross Settlement (RTGS) infrastructure to adopt ISO 20022 XML. The Indonesian central bank, Bank Indonesia (BI), is also modernizing instant payment through request to pay, QR code, as well as improving data security, information security, cyber security and fraud management.
There is a unique pattern in Indonesia where there is an enormous focus on transformation and digitization at the grassroots level: micro, small and medium enterprises (MSMEs), which represent around 60 percent of the country’s gross domestic product (GDP). ). The digitization of MSMEs will not only accelerate digitization in the country’s business life, but also create new actors at national level.
Agarwal observed that digital companies in Indonesia are growing rapidly. Give the banks opportunities to support them.
Agarwal also said Citi was committed to being part of the Indonesian business trip. The bank has existed for 54 years, since 1968, and over the years Citi has built a deep network in the country, a customer base that reflects the entire company. The bank serves multinational companies’ payment, liquidity and working capital financing. The bank also serves financial institutions, state-owned enterprises (SOEs) and other large local companies.
Agarwal said Citi is focused on growth in four key areas. First is to enable global trade. Companies are becoming increasingly global and expanding from their home market. To grow internationally, they need payment services, which are essential for commerce. For this, Citi has a global footprint that can help customers perform payment services across multiple countries.
The second is to strengthen e-commerce. More and more of these companies provide direct services to end consumers, especially through online sales. Therefore, providing financial infrastructure in the form of payment services can alleviate friction and pain points for their customers.
Third is to offer embedded financial services inside the customer’s platform. Several things happen on online platforms, where one can, for example, be a buyer, supplier, seller, as well as a content creator. Companies operating these platforms want to expand. Banks can help these businesses leverage their ability to deliver financial services with less burden.
Finally, Citi wants to strengthen financial institutions amid disruption from other financial technology (fintech) companies and digital banks. While there is a tendency to think of fintech as competitors to traditional banks, Agarwal said fintech is not a threat to traditional financial institutions.
This article was written in collaboration with Tenggara Strategics