Bank Commonwealth,(PTBC), the Indonesian subsidiary of Commonwealth Bank of Australia, is about to launch a digital wealth-management business that it expects to turbo-charge the business.
“Wealth management needs exponential growth,” said Ivan Jaya, head of wealth management and client growth at PTBC in Jakarta. Today, Jaya says, only about 1 million Indonesians, out of a population of around 270 million, invest in capital-market products – that’s about 0.4% of market penetration, versus 60% in Thailand and over 80% in Singapore.
One reason for this lack of interest is that banks have focused on selling to their wealthiest onshore clients.
“But we see wealth management needs to be for the emerging affluent and for millennials,” Jaya said. “It must grow fast, but we need the technology to support us.”
The bank is working with Swiss-based fintech Additiv to design its “SmartWealth” app.
But it has its own digital capabilities in Indonesia, in the form of Tyme Digital, a virtual bank that was founded in South Africa and acquired by CBA in 2015. Tyme focuses on account opening, and is known for adding kiosks in retail spaces to an otherwise online experience. CBA sold the South African business last year to a local partner, but folded the Indonesia arm into its existing, brick-and-mortar operation.
Wealth management needs exponential growth
Ivan Jaya, PTCB
“In Indonesia, CBA is a disrupter,” said Thomas Achhorner, Singapore-based managing director for Asia Pacific at Additiv. “Now they’re innovating in wealth management.”
PTBC has a traditional wealth-management aspect to its business, with about 10,000 “premium” customers who buy locally domiciled mutual funds, government bonds and insurance products. That’s currently about an 30 trillion rupiah ($2.1 billion) book of business, which is growing at about 20% per annum in assets.
PTBC aims to double that rate of growth by introducing its digital channel, Jaya says.
Just getting started
The SmartWealth service will provide PTBC’s premium banking clients with a complete view of their investment holdings at the bank, including funds, securities, bank accounts and bancassurance policies. It will also display relevant news, provide robo-advice, and help communications with relationship managers.
The bank is now rolling out the first iteration, with account information, to its premier customers. Next year it may introduce it to the bank’s broader customer base, assuming PTCB is able to support this with a marketing blitz. The bank could later open SmartWealth to new customers that aren’t necessarily depositors.
Jaya says bank will add the robo-advisory feature by July. Achhorner says it is likely that a straight-through transactional capability will be introduced next year, although Jaya says it could begin to roll out some execution functions later this year.
Selecting a fintech
Jaya says the bank selected Additiv last year in a process that addressed three needs.
First, it wanted to meet customer demands for 24/7 access to portfolio information and account-balance data.
Second, it wanted to automate giving users information that could impact their portfolios, such as news items. This was in part to take pressure off RMs, each of which may have up to 500 customers and therefore can’t provide all of them with timely updates.
Third, the bank wanted customers to ask questions via chatbot any time of day, and ultimately to transact through the app.
From there it sifted through software companies that had already done similar work for other financial institutions.
Achhorner says his firm’s other selling point is in its brand name: Additiv delivers digital solutions without requiring major changes to the bank’s existing core systems.