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Bank Sinar Branchless Banking Project-
                            Sinar Sip Experience

Mobile Banking & Payment For Emerging Asia Summit 2012

                                             October 2012
                                                       1
Bank Sinar Harapan Bali Overview
                                      Bank Sinar Harapan Bali is one of Bank Mandiri’s (largest
                                      Indonesia bank) subsidiary which focus on the micro segment
                                      development



                        TOTAL PROFIT : Rp. 8.84 bio                             Bank Sinar Strategy

                                                                       1•   Product Development

  TOTAL ASET :                 TOTAL FUNDING:        TOTAL CREDIT:     2•   Branch expansion outside Bali
  Rp. 1.03 Tn                   Rp. 833.9 bio        Rp. 628.7 bio
                                                                       3•   Branchless Banking implementation

                    NUMBER OF CUSTOMERS : 140.366



                       BSHB Vision : “TO BE DOMINANT IN MICRO & SMALL BUSINESS IN BALI


Source : Bank Sinar Data, June 2012                                                                             2
Financial Inclusion Level Comparison


   Many countries are still facing Financial Inclusion                                           …including Indonesia which have 49% of
                        Issue                                                                      population with no financial access

                                                                           OECD Countries*)
  Middle Asia & East Europe                                                60 million people
  193 million people                                                       8%
  49%
                        South Asia
                        612 million

                        58%                    SE Asia & Asia East Asia
                                               876 million people
            Middle East                                                                   Africa
            136 million orang                  59%                                        326 million

            67%                                                                           80%
                                                             Latin America
                                                             250 million

                                                             65%
Source: Global Financial Inclusion (McKinsey & Company, 2010)                                                Source : World Bank, 2010
*) OECD (Organisation for Economic Co-operation and Development)




                                                                                                                                          3
Main Reasons for high Un-banked Population

1       Low number of branches/ATMs                                      2   Low level of Financial Literacy



                                                                              Insufficient money                    79%

                                                                Saving             Unemployed      9%
                                                               Account
                                                                                 Feel no benefit 4%


                                                                             Feel do not deserve              60%

                                                            Credit / Loans   Do not need credit       20%

                                                                                   No collateral 4%


To open or set up a new branch/ATM need considerably                          Insufficient money            45%
high cost, Capex and Opex Approximately, a new branch        Insurance        Lack of knowledge         29%
requires Rp. 350 million of Capex and over Rp. 950 millon
Opex/year. Thus banks are more likely to open a new                              Feel no benefit      17%
branch/ATM in a higher density area such as city or urban
area.
Source: World Bank Database, 2010
                                                                                                                  4
Understanding Un-banked Segment

                                                       Banking is
                                                       not for me
                  I want convenient,
                  easy, and immediate                                      Banking brand
                  access to my money                                       enhances trust
                                                                           in services

                                                                                      Payments need
                                                                                      to be easy for
           Agent need to be                                                           me
           educated on the
           services in order to
           serve me well                                                       I (just like other 93%
                                                                               mobile subscribers)
                                                                               won’t change my
                                                                               number.


                               I and most of my friends and families have mobile phones

Source : Visa, BSHB research                                                                            5
Adaptation to New Technology

                                      At the same time, Indonesian are adaptive to new technology

      Mobile phone subscribers (millions)                                Facebook users outside US (millions)




Only within 18 years, mobile phone has swiftly                           Indonesia ranks 3rd in terms of facebook users
penetrated Indonesia population. It is so ubiquitous that                (outside US) with around 18% penetration of the
it  also     reaches   the     un-banked        segment.                 total population. Most of them access facebook via
                                                                         mobile phone.
Source: Association of Indonesia Cellular Phones and industry checking   Source: Socialbakers.com, April 2012                 6
Good Opportunity to Increase e-Commerce


Number of Internet Users (millions)              Indonesia e-Commerce
                                          Transaction Volume Projection (Rp Tn)




                                      • People are no w more likely to use e-commerce as the
                                        result of easiness and convenient to use
                                      • However, micro payment transactions generally are
                                        not yet facilitated.




                                                                                            7
Main Key Issues for M-Payment in Indonesia
                                                                  E-Money as one of m-payment
                                                         C
     A        Mobile Network Operators                       instrument is still lack of interoperability


• High churn rate becomes a problem especially when m-
  banking/m-payment services are view as increasing
  customer Stickiness
• Level of active SIM cards in the market
• Network coverage
• M-banking cost charged by the MNO




 B                                                       D    Some MNOs also have develop Mobile
                     Regulation
                                                                      Money products

• Cash-in/cash-out                                           • More harmonize cooperation needed

• Agent banking                                              • Separate and clearer role between Banks
                                                               and MNOs by regulation
• KYC/AML




                                                                                                            8
Indonesia Readiness for Mobile Payment

   Although number of phone subscribers
                                                                            Mobile phone prevalence is also relatively
   exceeds number of population, mobile
                                                                                             low*)
          coverage is still an issue




*)Mobile phone subscribers as a percentage of the 15-to 64 y.o population

Source: MasterCard Mobile Payment Readiness Index
                                                                                                                         9
Indonesia Readiness for Mobile Payment
                                       Global Perspective on Consumer Sentiment in
                                                        Indonesia




Consumer in Indonesia are not yet persuaded of the value of mobile payments. Willingness to use
them and current frequency of use, Indonesia ranks below average. Therefore, intense marketing and
education program may bring Indonesian consumers to adopt mobile payments
 Source: MasterCard Mobile Payment Readiness Index
                                                                                              10
Bank Sinar Harapan Bali – Branchless Banking Project


                                          • Promote national economic development by expanding financial
                                            access
                                          • Help prove that branchless banking can run well in developing
                                            countries




• Increase micro & small segment                                                             • Provide additional
  customers                                                                                    services to subscribers
• Cross-sell & provide additional                                                            • Increase number of
  services to existing customers                                                               AXIS customers



                               Developed Sinar Sip as the seed for branchless banking
                               • Increase access to financial services for the un-banked segment
                               • Increase customer loyalty
                               • Support partner’s growth and increase access to partners services




                                                                                                                         11
Branchless Banking Concept

              Traditional Banking

                                                       Account Opening


                            
                           Customer
                                                       Cash In / Deposit
                                                                                          G   Bank
                                                     Cash Out / Withdrawal

                Customers have to go to a bank branch to open an account or cash-in/cash-out

              Branchless banking
                                                                       Agent
                                              Account Opening



                                                                     m
    
                  Transfer P2P
                                 Customer
                                                  Cash In / Deposit

                                                                             m
                                                                                    Fund Management
                                                                                                      G
   Customer                                 Cash Out / Withdrawal     m                               Bank




Not only from traditional banking access, customers may use mobile phone or come to agents in order to do
                                        their financial transactions
           12

                                                                                                             12
Sinar Sip Feature

Sinar Sip is a saving account that can only be accessed through mobile phone. It offers
easiness, low rates and security


                                                           Key Features
                                            Can be accessed from any type of mobile
                                             phones (GSM)
                                            P2P
                                            Linked to Bank Sinar Account
                                            Cash-token
                                            Bill Payment
                                            Airtime Top-Up
                                            Purchase
                                            Low initial deposit
                                            PIN required




                                                                                          13
Sinar Sip Feature

The Sinar Sip product is a very low in pricing and fit for the unbanked populations.


                                   1. Cash-In/Cash-out                                   FREE
                                   2. Transfer              a.   Inter Sinar Sip                        FREE
                                                            b.   Sinar Sip – Bank Sinar Account     FREE
                                                            c.   Inter Bank Sinar Account                      FREE
                                                            d.   Bank Sinar Account – Sinar Sip     FREE
                                   3. Token Transaction                               Rp. 4.000,-
                                   4. Bill Payment          a. Handphone                               FREE
                                                            b. Telkom Product                          Rp. 1.000,-
                                                            c. Telkom Vision                           FREE
                                   5. Airtime Topup         a.   Axis                                  FREE
                                                            b.   Mentari                               FREE
                                                            c.   IM3                                   FREE
                                                            d.   XL Bebas                              FREE
                                                            e.   Tri                                   FREE
                                                            f.   Fren                                  FREE
                                                            g.   Esia                                  FREE
                                   6. Request Payment                                    FREE
                                   7. Monthly Account Fee                                FREE
                                   8. Account Statement     Print Account Statement / sheet            Rp. 2.500,-




                                                                                                                      14
Sinar Sip Feature


       Release 1          Release 2 * (date TBC)                   Future

Account Opening          Connect to other MNOs         ATM Functionality
Cash-In / Cash-Out       Loan Disbursement & Inq.      Loan Application
Sinar Sip to Sinar Sip   Product & System Enhncnt.     Fixed Term Deposit Purchases
Transfers                Agent Development             Micro Insurance
Cash to Cash Transfers                                 E-Money
Airtime Top-up
Linked Bank Sinar A/C
Bill Payment


                                                       Some rationales behind
                                               E-Money has greater flexibility than bank
                                               account in terms of KYC. Easiness to have e-
                                               money account will have great benefit
                                               ATM is essential to increase customer base
                                               since ATM can be an “AGENT”

                                                                                          15
Some customer education and adoption strategies


“Banking education
                                     “Low income
    Sinar-Mandiri”
                                 Payroll Package”
       • 50 markets
                             •1.000 users targeted
           targeted
                                 •~60 participants
•~7500 participants




   “Promo at Game                   “Community
             Online”        creation at Schools ”
   •Current 8 stores        •Canteen, school fee
 •35 stores targeted              payment usage




 “Motorbikes / car              “Program at bulk
   wash Program”                         laundry”
•50 stores targeted                 •25 laundries
                                          targeted


                                                     16
Sinar Sip : Technology Architecture



Telco Environment   Bank Environment




                                                                   17
Sample Transaction - user experience
Send Money Transaction




                                                           18
Sinar Sip Achievement
                      Number Of Account                                                 Total Float (Rp. 000)
2500                                                             100,000
                                                        2112                                                                       86,708
                                               1996                                                                      77,221
2000                                   1772                       80,000
                              1582                                                                             62,639
          1348      1428
1500                                                              60,000                              51,673
                                                                                 41,949 45,407
1000                                                              40,000

 500                                                              20,000

    0                                                                    -
          Jan       Feb       Mar      Apr     Mei      Jun
                                                                                  Jan       Feb        Mar      Apr       May        Jun

                  Transaction Frequency                                                    Type Of Transaction
5,000                                                    4,537               2.12% 2.23%      2.64%
                                                                     0.76%
          3,869                                 3,978            2.97%
                                                                         1.23%                                        Balance Enquiry
4,000                                                                                                                 Deposit
                               3,212
                     2,931             2,967                                                                          AirTime Topup
3,000                                                                                                                 Linked Balance Enquiry
                                                                                                      44.26%          P2P Transfer
2,000                                                                    25.15%                                       Withdrawal
                                                                                                                      Mini Statement
1,000                                                                                                                 Linked Mini Statement
                                                                                                                      Linked Transfer In
   -                                                                             10.11%
                                                                                                                      Others
           Jan       Feb       Mar      Apr     May      Jun                              8.52%



 Source : Bank Sinar Data, June 2012                                                                                                           19
What Sinar Sip Needs

1                   • KYC still must be done by bank personnel
                    • KYC requirements perceived to be very rigid by the un-banked
    REGULATION
                    • Agent Banking regulation has not been implemented
                    • E-Money regulation which needs to be fine-tuned

2                   • 3 major MNOs have e-money platform and product
        MNO         • MNOs have full access to infrastructure
    Collaboration


3
    NETWORK/        • Agents needed to expand its network
     AGENTS         • May Increase access to customers fund


4
    FINANCIAL       • Need efforts / expensive to educate un-banked segment
     LITERACY       • Government campaign in relation to financial inclusion, less cash
                      society and mobile payment
5
                    • Community as used case
    COMMUNITY       • need lot of merchants


                                                                                          20
121010_Mobile Banking & Payments for Emerging Asia Summit 2012_Bank Sinar Branchless Banking Project- Sinar Sip Experience

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121010_Mobile Banking & Payments for Emerging Asia Summit 2012_Bank Sinar Branchless Banking Project- Sinar Sip Experience

  • 1. Bank Sinar Branchless Banking Project- Sinar Sip Experience Mobile Banking & Payment For Emerging Asia Summit 2012 October 2012 1
  • 2. Bank Sinar Harapan Bali Overview Bank Sinar Harapan Bali is one of Bank Mandiri’s (largest Indonesia bank) subsidiary which focus on the micro segment development TOTAL PROFIT : Rp. 8.84 bio Bank Sinar Strategy 1• Product Development TOTAL ASET : TOTAL FUNDING: TOTAL CREDIT: 2• Branch expansion outside Bali Rp. 1.03 Tn Rp. 833.9 bio Rp. 628.7 bio 3• Branchless Banking implementation NUMBER OF CUSTOMERS : 140.366 BSHB Vision : “TO BE DOMINANT IN MICRO & SMALL BUSINESS IN BALI Source : Bank Sinar Data, June 2012 2
  • 3. Financial Inclusion Level Comparison Many countries are still facing Financial Inclusion …including Indonesia which have 49% of Issue population with no financial access OECD Countries*) Middle Asia & East Europe 60 million people 193 million people 8% 49% South Asia 612 million 58% SE Asia & Asia East Asia 876 million people Middle East Africa 136 million orang 59% 326 million 67% 80% Latin America 250 million 65% Source: Global Financial Inclusion (McKinsey & Company, 2010) Source : World Bank, 2010 *) OECD (Organisation for Economic Co-operation and Development) 3
  • 4. Main Reasons for high Un-banked Population 1 Low number of branches/ATMs 2 Low level of Financial Literacy Insufficient money 79% Saving Unemployed 9% Account Feel no benefit 4% Feel do not deserve 60% Credit / Loans Do not need credit 20% No collateral 4% To open or set up a new branch/ATM need considerably Insufficient money 45% high cost, Capex and Opex Approximately, a new branch Insurance Lack of knowledge 29% requires Rp. 350 million of Capex and over Rp. 950 millon Opex/year. Thus banks are more likely to open a new Feel no benefit 17% branch/ATM in a higher density area such as city or urban area. Source: World Bank Database, 2010 4
  • 5. Understanding Un-banked Segment Banking is not for me I want convenient, easy, and immediate Banking brand access to my money enhances trust in services Payments need to be easy for Agent need to be me educated on the services in order to serve me well I (just like other 93% mobile subscribers) won’t change my number. I and most of my friends and families have mobile phones Source : Visa, BSHB research 5
  • 6. Adaptation to New Technology At the same time, Indonesian are adaptive to new technology Mobile phone subscribers (millions) Facebook users outside US (millions) Only within 18 years, mobile phone has swiftly Indonesia ranks 3rd in terms of facebook users penetrated Indonesia population. It is so ubiquitous that (outside US) with around 18% penetration of the it also reaches the un-banked segment. total population. Most of them access facebook via mobile phone. Source: Association of Indonesia Cellular Phones and industry checking Source: Socialbakers.com, April 2012 6
  • 7. Good Opportunity to Increase e-Commerce Number of Internet Users (millions) Indonesia e-Commerce Transaction Volume Projection (Rp Tn) • People are no w more likely to use e-commerce as the result of easiness and convenient to use • However, micro payment transactions generally are not yet facilitated. 7
  • 8. Main Key Issues for M-Payment in Indonesia E-Money as one of m-payment C A Mobile Network Operators instrument is still lack of interoperability • High churn rate becomes a problem especially when m- banking/m-payment services are view as increasing customer Stickiness • Level of active SIM cards in the market • Network coverage • M-banking cost charged by the MNO B D Some MNOs also have develop Mobile Regulation Money products • Cash-in/cash-out • More harmonize cooperation needed • Agent banking • Separate and clearer role between Banks and MNOs by regulation • KYC/AML 8
  • 9. Indonesia Readiness for Mobile Payment Although number of phone subscribers Mobile phone prevalence is also relatively exceeds number of population, mobile low*) coverage is still an issue *)Mobile phone subscribers as a percentage of the 15-to 64 y.o population Source: MasterCard Mobile Payment Readiness Index 9
  • 10. Indonesia Readiness for Mobile Payment Global Perspective on Consumer Sentiment in Indonesia Consumer in Indonesia are not yet persuaded of the value of mobile payments. Willingness to use them and current frequency of use, Indonesia ranks below average. Therefore, intense marketing and education program may bring Indonesian consumers to adopt mobile payments Source: MasterCard Mobile Payment Readiness Index 10
  • 11. Bank Sinar Harapan Bali – Branchless Banking Project • Promote national economic development by expanding financial access • Help prove that branchless banking can run well in developing countries • Increase micro & small segment • Provide additional customers services to subscribers • Cross-sell & provide additional • Increase number of services to existing customers AXIS customers Developed Sinar Sip as the seed for branchless banking • Increase access to financial services for the un-banked segment • Increase customer loyalty • Support partner’s growth and increase access to partners services 11
  • 12. Branchless Banking Concept Traditional Banking Account Opening  Customer Cash In / Deposit G Bank Cash Out / Withdrawal Customers have to go to a bank branch to open an account or cash-in/cash-out Branchless banking Agent Account Opening  m  Transfer P2P Customer Cash In / Deposit m Fund Management G Customer Cash Out / Withdrawal m Bank Not only from traditional banking access, customers may use mobile phone or come to agents in order to do their financial transactions 12 12
  • 13. Sinar Sip Feature Sinar Sip is a saving account that can only be accessed through mobile phone. It offers easiness, low rates and security Key Features  Can be accessed from any type of mobile phones (GSM)  P2P  Linked to Bank Sinar Account  Cash-token  Bill Payment  Airtime Top-Up  Purchase  Low initial deposit  PIN required 13
  • 14. Sinar Sip Feature The Sinar Sip product is a very low in pricing and fit for the unbanked populations. 1. Cash-In/Cash-out FREE 2. Transfer a. Inter Sinar Sip FREE b. Sinar Sip – Bank Sinar Account FREE c. Inter Bank Sinar Account FREE d. Bank Sinar Account – Sinar Sip FREE 3. Token Transaction Rp. 4.000,- 4. Bill Payment a. Handphone FREE b. Telkom Product Rp. 1.000,- c. Telkom Vision FREE 5. Airtime Topup a. Axis FREE b. Mentari FREE c. IM3 FREE d. XL Bebas FREE e. Tri FREE f. Fren FREE g. Esia FREE 6. Request Payment FREE 7. Monthly Account Fee FREE 8. Account Statement Print Account Statement / sheet Rp. 2.500,- 14
  • 15. Sinar Sip Feature Release 1 Release 2 * (date TBC) Future Account Opening Connect to other MNOs ATM Functionality Cash-In / Cash-Out Loan Disbursement & Inq. Loan Application Sinar Sip to Sinar Sip Product & System Enhncnt. Fixed Term Deposit Purchases Transfers Agent Development Micro Insurance Cash to Cash Transfers E-Money Airtime Top-up Linked Bank Sinar A/C Bill Payment Some rationales behind E-Money has greater flexibility than bank account in terms of KYC. Easiness to have e- money account will have great benefit ATM is essential to increase customer base since ATM can be an “AGENT” 15
  • 16. Some customer education and adoption strategies “Banking education “Low income Sinar-Mandiri” Payroll Package” • 50 markets •1.000 users targeted targeted •~60 participants •~7500 participants “Promo at Game “Community Online” creation at Schools ” •Current 8 stores •Canteen, school fee •35 stores targeted payment usage “Motorbikes / car “Program at bulk wash Program” laundry” •50 stores targeted •25 laundries targeted 16
  • 17. Sinar Sip : Technology Architecture Telco Environment Bank Environment 17
  • 18. Sample Transaction - user experience Send Money Transaction 18
  • 19. Sinar Sip Achievement Number Of Account Total Float (Rp. 000) 2500 100,000 2112 86,708 1996 77,221 2000 1772 80,000 1582 62,639 1348 1428 1500 60,000 51,673 41,949 45,407 1000 40,000 500 20,000 0 - Jan Feb Mar Apr Mei Jun Jan Feb Mar Apr May Jun Transaction Frequency Type Of Transaction 5,000 4,537 2.12% 2.23% 2.64% 0.76% 3,869 3,978 2.97% 1.23% Balance Enquiry 4,000 Deposit 3,212 2,931 2,967 AirTime Topup 3,000 Linked Balance Enquiry 44.26% P2P Transfer 2,000 25.15% Withdrawal Mini Statement 1,000 Linked Mini Statement Linked Transfer In - 10.11% Others Jan Feb Mar Apr May Jun 8.52% Source : Bank Sinar Data, June 2012 19
  • 20. What Sinar Sip Needs 1 • KYC still must be done by bank personnel • KYC requirements perceived to be very rigid by the un-banked REGULATION • Agent Banking regulation has not been implemented • E-Money regulation which needs to be fine-tuned 2 • 3 major MNOs have e-money platform and product MNO • MNOs have full access to infrastructure Collaboration 3 NETWORK/ • Agents needed to expand its network AGENTS • May Increase access to customers fund 4 FINANCIAL • Need efforts / expensive to educate un-banked segment LITERACY • Government campaign in relation to financial inclusion, less cash society and mobile payment 5 • Community as used case COMMUNITY • need lot of merchants 20