OJK reveals five strategic advantages of universal banking implementation
The Financial Services Authority (OJK) has revealed five strategic advantages it believes the national banking sector can gain from implementing universal banking, one of which is increased cost efficiency. Universal banking is a model in which a single bank can provide a variety of integrated financial services within one entity.
Dian Ediana Rae, Chief Executive of Banking Supervision at OJK, stated in a written response in Jakarta on Thursday that this cost efficiency can be achieved through the consolidation of infrastructure and resources within an integrated banking entity.
The second advantage, according to Dian, is that the implementation of universal banking can strengthen a bank’s business position through income diversification from various business lines, such as commercial banking, investment banking, and wealth management.
The third strategic benefit is that it allows banks to conduct broader cross-selling of financial products to both retail and corporate customers, thereby increasing customer stickiness.
Fourthly, the OJK assesses that the universal banking model can encourage faster innovation in financial products and services due to the synergy created between business units within a single entity.
Finally, the implementation of universal banking is believed to contribute directly to increasing financial inclusion and public access to various formal financial products.
Dian noted that global benchmarks show universal banking has become common practice in countries with advanced financial sectors, such as Germany, the United Kingdom, and Singapore. At the ASEAN regional level, besides Singapore, countries like Malaysia, Thailand, and the Philippines have also adopted the universal banking model as part of their strategy to strengthen their national financial sectors.
Regarding the recently passed revision of the Financial Sector Development and Strengthening Law (UU P2SK), Dian said the OJK generally welcomes and supports its enactment. The OJK has been actively involved in the formulation process of the regulatory revision through coordination and providing input to the government. The OJK will also follow up by preparing the necessary implementing provisions in accordance with its mandate after the revision of the UU P2SK is officially promulgated.