Bank IT spending to rise by 25% next year
Bank IT spending to rise by 25% next year
Urip Hudiono, The Jakarta Post, Jakarta
Total spending by the country's banking sector on information
technology (IT) systems is expected to rise by up to 25 percent
next year, a workshop on banking technology revealed.
The rise will be mainly driven by the banks' increasing need
to process more transactions in their future operations, as well
as to provide better services to their customers.
"IT utilization in the banking sector will become ever more
important in the future as consumer banking in the country
grows," LippoBank president Joseph Luhukay said on Tuesday during
the workshop.
"It is totally impossible nowadays to process credit card
transactions or corporate payroll transactions using pencil-and-
paper methods."
Data from the Indonesian Association of Credit Card Issuers
shows that there are currently 5 million credit card users in the
country. The figure, which accounts for only 17 percent of a
potential base of some 28 million, already generates up to 12
million transactions a year.
Joseph, who holds a computer science degree from the
University of Illinois, said that the fact could also be seen in
recent studies by IT market analysts, which estimated that up to
35 percent of the total US$20 billion in spending next year by
banks in Asia would be allocated on IT procurement.
"Banks in Indonesia alone will likely spend up to $1.5 billion
in 2005 on their IT systems, with every bank spending between $5
million and S15 million," he said.
The banks had spent some $800 billion on IT infrastructure so
far this year.
Joseph explained that the spending would most likely be on the
upgrading of the banks' existing IT systems, which had not been
upgraded since the economic crisis in 1997, so as to enable them
to cut down on their operating expenses.
"But the banks are now in a better condition and have to keep
improving their services to stay competitive," he said.
In order to keep their competitive edges, banks were providing
banking services via the Internet (popularly known as "e-
banking") and through mobile peripherals (or "m-banking") -- all
of which needed IT systems using cutting edge technology.
Joseph also said that the banks would also need better IT
systems to manage their customer databases if they wanted to
apply a risk management system so as to be able to participate in
Bank Indonesia's plan to establish a credit information bureau
next year.
He said that the banks should therefore deploy an integrated
IT system for their operations, consisting of a main data center
connected to each of their individual branch office IT systems.
Concerning LippoBank itself, he declined to reveal how much
the bank had invested in its IT system, only saying that it was
"quite a lot" due to the fact that Lippo was among the country's
largest payment banks.
"Our IT system currently handles transactions worth up to Rp
400 trillion (US$44 billion) per day," he said.