IT products may boost efficiency of banks: Experts

JAKARTA (JP): The application of information technology in the banking industry will help improve the banking system's efficiency, experts said yesterday.

Aswin Wirjadi, the head of the information technology division at Bank Central Asia (BCA), said that pursuing information technology was irresistible for banks with more than 100,000 customers.

"Otherwise, you will need more staff, more space and more expenditure to serve your expanding customer base," Aswin said after signing an agreement to spend US$650,000 on the installation of Novell Intranet ware.

To illustrate, Aswin said, BCA recorded over 330,000 transactions on Dec. 24, 1996 through its automated teller machines (ATMs): "Imagine, how many employees and how much space is needed for 330,000 transactions a day."

Aswin said his division spent Rp 160 billion ($67 million) a year financing and upgrading its information technology services: about Rp 30 billion was spent on telecommunications.

Information technology products like ATMs provide additional income for banks, called fee-based income, because every card holder drawing money through ATMs is charged a transaction fee.

Banks normally charge administrative fees to ATM card holders. BCA, for instance, charges each of its ATM card holders Rp 1,000 a month. Other banks charge even more, up to Rp 5,000 a month.

"So, there must be economic justification for pursuing automation in banking services," Aswin said.

BCA is the country's largest private bank in terms of assets. Its assets grew 40 percent last year to US$1.2 billion, while its before-tax profit grew 46.6 percent to $87.2 million. BCA has about six million customers, with total deposits of $11.2 billion at the end of last year.

Elisa Lumbantoruan, the business alliances manager at the information technology consultant Oracle Indonesia, agreed that, besides raising fee-based income, the installation of information technology products by banks could also improve their corporate image, customer satisfaction and most importantly profitability.

But, Elisa said, the country's banking industry was still inefficient amid stiff competition from foreign banks, and the capital market, as they competed against each other to build their own ATM networks.

"Why not they share ATMs to reduce costs. In foreign countries, it is normal for banks to share ATMs," Elisa said.

Local commercial banks, he added, still relied on extensive, large and luxurious branches, while their competitors -- foreign banks -- had introduced branch-less banking systems through various product and service innovations.

Consequently, local banks are overburdened with staff sitting in branches dealing with less customers.

"The Indonesian Private Bank Association should define the appropriate ratio of bank employees to customers," Elisa suggested.

"Banks should also change the definition of branch offices to sales offices; thus, employees would go to customers rather than sitting behind tables waiting for customers," he said.

Tellers in local banks remained passive, waiting for customers to come and make their transactions, while tellers in foreign banks were more proactive, going to customers and delivering services.

"Therefore, we must change the definition of a teller to a seller, thereby making them more proactive in dealing with customers," he said. (rid)