Choosing a bank in a crisis

Choosing a bank in a crisis

By Taufik

Ten years after the New Order government launched Pakto 1988 (October Package 1988), the country's banking sector is in its gloomiest era. Not only have the country's state and private banks suffered huge monetary losses, but they have also lost credibility with their clients. For example, Bank Central Asia (BCA) was affected by a major bank run, which led to the bank being made a nationalized bank (BTO). Also taken over was private bank Danamon Bank, while other big private banks such as BDNI and Bank Umum Nasional were closed by the government.

Like the private banks, state banks also suffered huge losses as a result of a prolonged economic crisis, which started in the middle of 1997. But due to their ownership status, the state banks did not have to suffer any "adjustment" to maintain their existence. The crisis of confidence faced by private banks appeared to be a blessing in disguise for state banks, with a large number of depositors shifting their money from private banks to state banks.

International banks also enjoyed benefits from the crisis of confidence affecting private banks. They have become the new targets of Indonesian depositors. What is interesting is that the international banks have taken advantage of the phenomenon by launching aggressive promotion campaigns.

This condition was a contradiction to the phenomenon which happened not long after the government launched Pakto 1988. At that time, both state and international banks were left powerless, as if they were only spectators watching the country's private banks move aggressively to expand their business. As a result, the private banks managed to become dominant players in the Indonesian banking market in less than 10 years.

The phenomenon affecting banking over the past two years clearly raised a big question about the fate of the country's private banking sector. Especially, have customers really forsaken domestic banks? A survey held recently on 926 bank customers, from various socioeconomic strata in 10 big cities on three of Indonesia's main islands, shows that state banks dominate the top five positions for brand awareness. Three of the five favorite banks were state banks while the remaining two were domestic private banks. Interestingly, one of the domestic private banks, BCA, has become a state bank. The big five were BCA, BNI 46, BRI, BTN and Bank Bali.

The survey's result, actually, was not contradictory to the phenomenon affecting banking lately. Undoubtedly, state banks are much more popular (more truthful) than private banks in this time of crisis, even though the government has guaranteed the safety of customers' funds deposited both in state and private banks. However, the fact that BCA topped the rank, with a large proportion, reflects that customers in Indonesia make their choice of bank very carefully. They do not only take into account the status of the shareholders but also the advantages offered by the banks. Nowadays, the reasons for deciding into which bank to deposit funds are not only safety and good returns but also, more importantly, to get support in handling various routine transactions.

For example, this is the reason why people prefer BCA to BNI 46. BCA can give more services related to the routine household demands of Indonesian depositors than BNI 46. In addition, BCA, with its new BTO status, is no longer different from BNI 46. They both belong to the state.

It is clear, however, that being a state bank has become a great selling point. That is why Bank Bali, which provides similar services to its customers, took fifth position in the rank. Because its service network, mainly its branch offices or treasury offices, is much smaller than that of BNI 46, BRI and BTN. And especially, the last bank, BTN, has taken advantage of the network of PT Pos Indonesia. In other words, besides ownership status, the vast network owned by the concerned banks plays an important role.