Over the past two years, Bank Jago has been systematically enhancing its data and analytics capabilities to provide intuitive, life-centric banking services for millions of its customers across Indonesia. In this interview with McKinsey’s Badrinath Ramanathan, Bank Jago’s Director of Digital Banking Peterjan van Nieuwenhuizen discusses how the bank provides its customers with more-relevant and better financial services while helping them develop financial management skills. An edited version of their conversation follows.
Badrinath Ramanathan: You are familiar with our AI bank construct.1 Considering that there are different kinds of AI banks, how would you describe Bank Jago as such?
Peterjan van Nieuwenhuizen: Bank Jago’s overall aim is to help consumers, small merchandisers, and small businesses get closer to achieving their dreams and aspirations through better financial management. There are a few principal ways in which we do that. One is that we serve them through technology and fully digital delivery. Another is that we serve them as part of an ecosystem rather than as a stand-alone digital bank. That automatically has implications from a technology and AI perspective. From the beginning, we invested heavily in a modern technology stack, including advanced analytics and machine learning—both of which are required because without digital technology, our market scale would be difficult to achieve. Working this way has allowed us to gain more than four million customers in less than 18 months and offer differentiated, nonstandard banking features.
We also aim to deliver life-centric banking. Analytics allows us to personalize [for] and adapt to all our users. Because we’re embedded in an ecosystem, we have a rich set of data from both Bank Jago and from our partners. By combining all of that, we can use data optimally, and we can offer a richer value proposition to our users.
Badrinath Ramanathan: What’s special about Bank Jago’s approach?
Peterjan van Nieuwenhuizen: We don’t treat digital as a channel to serve people with traditional financial products and services. Instead, we look to reinvent the entire value proposition, shifting the focus from money and financial services to the things that really matter to the lives of our users and the ways financial services can help them do or achieve those things. That’s also where the importance of data comes in. Our ecosystem approach is still relatively novel in financial services. It’s not about simply partnering with some companies to cross-sell; it’s about jointly building an ecosystem where we can infuse our financial services products within our partners’ lifestyle services, such as food delivery, transportation, or e-commerce. Providing that kind of digital lifestyle with financial services embedded is profoundly useful for the customer in a way that traditional financial services are not.
Badrinath Ramanathan: Apart from its use of data, what other examples of innovation has Bank Jago brought to the industry?
The sheer opportunity is what makes this both very exciting and very challenging. This is a market with 280 million people.
Peterjan van Nieuwenhuizen: About a year ago, we launched features called “pockets” and “shared pockets.” It was inspired by an Indonesian concept called the “amplop” system, in which a person uses envelopes to save money for different purposes. We didn’t see a digital equivalent of that in banks. So we created that concept digitally, where users can have as many pockets as they would like to separate their money for different purposes. Then they can share the pockets with, say, their kids or spouse or another member of their household. That is an example of a life-centric banking feature that aims specifically at how Indonesians like to approach the management of their money. For the first year or so after the launch, we were quite busy scaling the system and getting it ready for customers to use. In the coming year, we have a plan to launch other features like this one that will be truly differentiating.
Badrinath Ramanathan: In your view, what’s the most exciting thing—and the most challenging thing—about running a digital bank in Indonesia?
Peterjan van Nieuwenhuizen: The sheer opportunity is what makes this both very exciting and very challenging. This is a market with 280 million people. But on top of that, probably 50 percent of them are either unbanked or underbanked. While that gives us a fantastic opportunity in many areas of the market, it’s also difficult because there’s a lot of work to do to understand what is needed that presumably hasn’t yet been provided with more traditional services. We have to continuously learn what they need, how we can adapt to them, and how we can offer a service and experience that’s right for them.
Badrinath Ramanathan: How have things at Bank Jago changed in the several years that you have been on this journey?
Peterjan van Nieuwenhuizen: Our core strategy has changed remarkably little. Speaking for myself, I feel that our purpose to help people get closer to their dreams and aspirations through different styles of financial management still persists. But we have learned a lot about what it takes to execute against that aspiration and that purpose. We have many moving parts that all have to come together in an orchestrated way: technology, data analytics, machine learning, people, and so on. On top of that we have more than 30 ecosystem partnerships. Bringing everything together in the right way was harder than we had initially thought. So we’ve had to adjust our perspective on how to properly coordinate these pieces.
We started this just before COVID-19 and had a lot of assumptions in terms of how to build an entirely new team from scratch, infuse our purpose and build our culture, and set a direction for that team. We were using tactics that would have worked in the past but didn’t work during times of COVID or physical lockdowns or in a remote workplace. Having to build this team, this organization, and this culture under these circumstances was unprecedented, as it was for everyone else in the world. And we had to modify all our existing experiences and assumptions to achieve that.
Badrinath Ramanathan: What you have achieved in two years has been incredibly inspiring. What advice would you give to other AI banks?
Peterjan van Nieuwenhuizen: Three things: First, don’t fall into the trap of only considering digital technology as a channel to provide existing products and services. It’s an opportunity to fundamentally reinvent your value proposition, and I believe that should be done in a life-centric manner so that it’s more about what people truly care about and not just about basic financial services. Also, that way, the data, AI, and analytics comes into its own because it allows you to better understand not just groups of users but also individual users. That’s one way to max out the opportunity that technology and data offer to reinvent your value proposition.
Second, don’t settle for legacy technology or slightly older technology if you want to push the boundaries of what you offer and how you offer it to your users. In our experience, you have to invest in cutting-edge technology; using legacy systems just slows you down. Sooner or later, it prevents you from offering what you really want to offer.
Third, think carefully about the right way to combine a financial services culture and a tech culture. Because we are so heavily reliant on technology, data, and AI, we can’t get away from adopting a lot of the same practices that successful tech companies have adopted. However, banks still have relevant knowledge and experience to offer from decades of learning how to do risk management, liability management, and so on. How you bring those together so that it’s not one or the other is something that requires careful thought.