Dyota Marsudi: The "Offline" Ecosystem Is the Key to Embracing the "Unbanked" and "Underbanked" Segments

In the first interview DailySocial, President Director of PT Bank Aladin Syariah Tbk (IDX: BANK) Dyota Marsudi shared his ideas and strategies to reach the community unbanked and underbanked in Indonesia with a simple approach, namely touching aspects that are closely related to their daily lives.

As a first step, Bank Aladin synergizes with one of the modern retail giants PT Sumber Alfaria Trijaya Tbk (IDX: AMRT). Alfamart's extensive network has become Bank Aladin's key strategy todeliver service in an efficient manner and accessible. This synergy is even more solid when Alfamart officially holds about 2,2% of Bank Aladin's shares.

Bank Aladin was previously known as Bank Net Indonesia Syariah. The company officially changed its identity in June 2021. Besides Alfamart, an insurtech company from China ZA Tech Global also became an investor in Aladin Bank in April 2022.

Below are excerpts from our interview to understand more about the strategy omnichannel Bank Aladin in strengthening its position in the industry digital bank.

Tell us about the initial transformation process into Bank Aladin?

Answer: That was a very difficult thing to do. Actually, we already have a sharia license even though the target market now is different. To build a company with new owners and management, there are two things you can do. First, running two businesses in parallel. Business legacy keep going, but don't put too much effort. wind down Gradually, in 2-5 years it will shrink.

Second, build from scratch. For banks, building something new is quite difficult. If you have to run two banks at once, fine legacy or digital banks, of course it is difficult because the businesses, systems and teams are different. Well, we have a new team with the team that ran the business and technology previously.

What we did is to decide everything quickly. The term rip the bandage off. This happened before I entered. At that time, the controlling shareholder (PSP) and the team took a number of actions, namely searching buyer for take over assets, look back at the liabilities, and stop renewal system. There are several people in-let's go, but we ask them reapply again so we can assess.

What is your hypothesis regarding Bank Aladin's target market and strategy?

J: A little flashback, before changing its name, Bank Net Syariah played in the corporate segment, syndicated loans, which in-drive by Maybank Malaysia. At that time they wanted to return it license [syariah], but OJK provides opportunities for those who want to invest here.

The controlling shareholder (PSP) created a thesis—well, I wasn't on board at that time—which happened to be the same thing I learned while working at Vertex Ventures. Build tech company means there are two things that can be done, namely (1) create existing market more efficient and (2) open market new.

We look at segments corporate or ultra high network already overserved in the banking sector, especially financial services. There are already special applications and products. Lots Wholesale which gives loan. So this segment is already afluent and relatively comfortable.

In fact, the biggest segment that needs attention is middle income and below. We call it as unbanked and underbanked whose population reaches 77%. There are those who have an account, but haven't used it fully. There is also an account dormant. They have no access to official or formal financial services.

The reason they don't have access to financial services is that they need them simple product, not sophisticated or products with complicated structures. Then, question access. Before digital banks existed, you had to open an account at a bank where not all locations were available and were not open all day. Lastly, in a survey, sharia is the second most important factor when customers choose a bank. These are the three main things that became the basis for building Aladin.

Simple product and access is reflected in the product. Derivatives are our partners. When we build Bank Aladin, the partners we collaborate with must have a significant contribution to the thesis. So, Alfamart is the most suitable for the segment we are targeting. Every month tens of millions of people come to Alfamart. They transact in small volumes. Apart from that, Alfamart has 17.000 outlet locations in Indonesia. They already have trust towards Alfamart and has become part of the daily life of the local community. For the segment we are targeting, interaction is important. They can interact comfortably.

Access, trustand simple product we've got it. What we do next is amplify those thingss. We try and make products as simple and accessible so that we can attract this 77%, including MSMEs, who do not yet have access to financial services and loans.

How is the technological transformation and product development of Bank Aladin?

J: At the beginning of 2021, our team only had 30 people. Then, the number reached 200 people at the end of 2021. Around 50%-60% of the total head count We are product engineer. If benchmarking bank in general, portion product engineer it could be ten times as much. However, we are a bank. Everything we do must beassess well. We must compy with regulations.

We run a very nimble company. We start simple. We build things as we go. Not [using model] waterfall where it has to be complete first and then launch. We start developing features from the most needs core, like the app for and transfer features. Then we launch [application] in early 2022 after obtaining a license from OJK and BI. This means we are building a digital bank in less than six months. Everything we build is from scratch, with no legacy issues.

We build all the technology ourselves, except core. We used to use Silverlake for core banking system. Then, we changed to Mambu, which is a cloud-based core banking system. We are culturally more similar to tech companies than banks, however operationally we are banks. We are not fintech, P2P, or finance.

How is the market acceptance of the Bank Aladin application?

J: The number of our customers who have passed KYC at Dukcapil and are guaranteed by LPS—This is an active account, right download, phone number, or email—almost 700 thousand. For the record, we haven't pushmarketing fast, only in the second semester.

Product funding already half a trillion Rupiah, here liabilities yes. Meanwhile, product financing we're just getting started. It has [distributed] several hundred billion, but it is not yet optimal. Primarily, product financing we are for beg Alfamart, meanwhile funding for retail users. Most of our customers are retail.

We get input from our customers. It turns out, there are still people who think we are borrowing, which is not good for us. When we go down to tier 2 or 3 cities where there is Alfamart coverage, awareness Aladin has not been completely absorbed. That's why we're going to push marketing in second half and establish Aladdin Bank's name is even better. We plan a lot of products, hopefully we get it right. Hopefully brand awareness we are stronger and not associated with pinjol. Who knows, our 700 thousand customers could grow to seven million.

Will Aladin Bank go cardless?

J: We will continue to use cards. We give people the option to have a card or not during registration.

We can feel optimistic about technology. The development is very fast. Just look now a lot tech company big, some have even gone IPO. However, will everything be cardless or cashless in the next 5 or 10 years? Maybe in unpopular opinion, I don't think this is known yet. So, what do we need to do? We need to be able to serve the customer today. We can't wait 5-10 years for their [technology adoption] to be ready. This is why we are approach with model omnichannel.

Jaringan omnichannel that we have, with all due respect, at least from the offline side should be the strongest [owned by] digital banks today. We partner with Alfamart for cash withdrawals and deposits. We have access to over 17,000 location. The Alfamart ecosystem is large and Primarily offline. Online digitalization is at Bank Aladin.

Do we not collaborate with online platforms, such as e-commerce, ride hailing, or travel? The answer is yes, but we believe the offline element is more important now considering the target market is unbanked and underbanked. Once the offline [ecosystem] is established, we can start focusing on online. We could full online, nothing stopping us. However, the reason we went offline is we know our target segment. We know their behavior. We know what they need. So this is it go-to market strategy, no capabilities issue.

Is there a synergy in opening an account at an Alfamart outlet?

J: Account creation requires KYC. This is very regulated because there is risk assessment. We don't plan to do onboarding customers at Alfamart outlets because it will become a branch, less-efficient, complicated processes, and high investment.

What we do through this synergy is that cashiers at Alfamart can help direct potential customers to download the Bank Aladin application and go through e-KYC to process Alone. This means that we want to make potential customers feel comfortable using the Alfamart approach. We build our own assets that can be complimentary for assets owned by partners.

What is Bank Aladin's focus this year?

J: Our features push since the beginning it has been cash withdrawals and deposits at Alfamart outlets. If it's just a transfer option, how attractive is it? Meanwhile, segment unbanked and underbanked on average, they don't have an account.

We are trying to open access that is simple and not complicated, namely Alfamart. Customers can save or withdraw cash at the cashier if there is no ATM. Tech integration is done so we can stairs quickly. Basically, just turn it on. So customers can do this at all Alfamarts in Indonesia. We will also encourage promotions at Alfamart to increase transactions and understanding behavior they.

We also want to focus on financing, to make sure our liabilities are productive. In the next semester, we'll build financing products for MSMEs because we can assess MSMEs better than retail. We are a bank, not a P2P or finance. Our NPL is really monitored by investors.

Why synergize with ZA Tech? What are the collaboration products?

J: Not many people know that the insurtech company ZA Tech Global has a digital bank and Number one of Hong Kong. They have actually built a winning bank. Learn from them immensely exciting. For us, insurance seems to be a logical next step. Insurance is core product they and we exist pipeline over there, fine microinsurance, loan insurance, whatever that is.

At this time, we can't closed from this synergy. Please note, all the products we build are only for our segment, namely unbanked, underbanked, and SMEs. We have to be disciplined, whether [what is built] fits the glasses unbanked and underbanked. So, we will not make complex [products]. We always try to make decisions based on the data we collect.

Partnership is not easy because chemistry, strategy and other aspects must match. We already align all and only problems timeline just. So, when we find a good partner, we'll pull the trigger.