Prize, lottery war among banks heats up
Prize, lottery war among banks heats up
I. Christianto, Contributor, Jakarta
The impact of the financial crisis and economic turmoil have
likely faded as most local banks, which are also the pillars of
the country's economy, are now enjoying fiercer competition by
launching continuous programs with tremendous prizes.
More and more banks, either state or privately-owned, offer
big cash prizes, luxury cars, expensive home appliances, free
overseas trips and other goodies.
It seems that the era of the "liberalization without
regulation", which caused the collapse of the banking sector in
Indonesia, is over; and the banks have won back the trust from
the public.
Less than five years ago, the public lost much of its
confidence in local banks and capital flight became rampant when
the degree of bank violations worsened, with liquidity and
Capital Adequacy Ratios (CARs) of many banks becoming dangerously
low.
To improve the banking industry, the government has taken
various measures to revive the sector. Among the comprehensive
efforts made by the government was the scheme focusing on
economic reform and bank restructuring. It has also taken over
floundering banks and rehabilitated others by recapitalizing
them.
The effort aimed to, among other things, restore the sector's
viability and enhance transparency of information by publicizing
financial reports. Such a move is, so far, a part of the
direction towards transparency.
And, the public have started to see good signs. Local media
have already been heavily colored with ads of spectacular prizes
and lotteries from many banks. Big-scale banks, like Bank Central
Asia (BCA) and Bank Mandiri, have even had their own TV programs
broadcast on expensive prime airtime.
Others, as if to win the war at all costs, offered
outstanding, sometimes hard-to-believe, prizes.
Bank Internasional Indonesia (BII), for example, offers a
total of Rp 10 billion in prizes in a program named Lucky Dot.
The customers of the bank can participate in the program when
they use their ATM cards for certain payments including
telephones or credit card bills.
The bank, whose future is now one of the hottest issues in the
country's financial sector, has been operating normally and has
even continued its aggressive advertising campaign for its
products.
There have not been any runs on the bank, and BII depositors
remain calm even though the bank is already technically bankrupt.
Bukopin offers a prize of Rp 125 million for five winners in a
six-month period from May to October this year. This is the
second program launched by Bukopin after a similar program in
1999.
Meanwhile, one of the country's leading banks, BCA has also
constantly initiated prize and lottery programs. Currently, the
bank offers a total of Rp 3 billion prize to its customers who
use their debit card. The prizes range from Rp 25,000, Rp 50,000,
Rp 100,000, Rp 500,000 and Rp 1 million.
Another large bank, LippoBank, has also introduced prize and
lottery programs. The bank offered million-of-rupiah prizes last
year and just extended the program this year which was dubbed
SpectaPrize.
It offers a total of 37 Mercedes Benz cars in the program
which will end in December this year. Last year, a number of
winners of LippoBank's prize program took home Jaguar and BMW
cars.
According to Harry Sasongko, director of consumer banking of
LippoBank, the prize program which also offers home appliances,
television sets, mobile phones and home theater sets, is a kind
of appreciation to the bank's loyal customers.
In this year's program, each month, there are two Mercedes
Benz A 140s up for grabs since the program began in May until
January 2003. The grand prizes include four Mercedes Benz C 200s.
To participate in the program, LippoBank's depositors should
have at least Rp 100,000 in their accounts to have a number to be
drawn randomly each month.
LippoBank credit card holders will also have a number for
every Rp 100,000 transaction. Every fold of Rp 100,000 will have
a number for the drawing.
Meanwhile, in the LippoBank's Giro SpectaPrize program, a
depositor will have a number for an average Rp 10 million
deposit. Prizes for the winners include a Mercedes Benz S280,
four Mercedes Benz E260s and 10 Mercedes Benz A140s. Meanwhile
savings of Rp 500 million will automatically win a shopping
voucher worth Rp 3 million.
Some business analysts believe that market players are
actually hard to like real competition and that it ranked even
lower in the financial entrepreneurs' favor. Because banking
operation is closely related to a sense of security, especially
security concerning the future.
Other analysts even say competition among banks is something
to be feared as a potential source of serious disruptions.
However, the fact shows that more banks in Indonesia are
involved in the prize and lottery war.
LippoBank's vice president of promotion and communication Agus
Suyanto said that prizes were aimed at increasing the total
savings of the existing depositors as well as to raise the
customers' loyalties.
"We also want to increase the public awareness of the related
products," he says, admitting the prizes were offered to win the
stiff rivalry among banks.
He adds such a program with big prizes would also raise his
company's positioning and also public confidence. "The public
believe that banks which do not hold any program with attractive
promotions are the banks which have their markets."
He says the prize program has so far succeeded in terms of
increasing total savings at LippoBank.
"It's difficult to compare the figures before and after the
program as we are holding it continuously. The fact is, the
growth rates of total saving at LippoBank are always above the
national figure. Based on the data from the Central Bank, we have
a growth rate of 16 percent compared to the national figure of 12
percent in 2001. Until March this year, the figures were 9
percent compared to 7.5 percent nationwide," he said.
He added the prize program was being held carefully, fair and
transparently.
"LippoBank has the licenses from the Ministry of Social
Affairs (to hold the prize program). We select the winners based
on balls with numbers mixed in a drawing bin. Government
officials always witness the selection from the Social Affairs
Ministry, municipality, LippoBank's auditing executives, and the
public. Then, the winners are legalized by legal experts."
Cecep Ridwan of Bukopin has the same explanation, saying that
the government licenses every running prize program.
"The drawing is conducted based on a computerized system.
There are always witnesses and related government officials. We
have to be transparent on this," he reiterates.
He adds that every prize and lottery program conducted by any
bank also had goals in terms of the business aspect.
"Such a program aims as a reward for the depositors and to
maintain customers for their loyalties. As well, there is always
business aspects. We have also made progress in developing new
products, marketing, and so on over the past few years," he says,
adding that his bank expects to see a significant increase in the
number of depositors in a near future.
According to Agus, in addition to rewards and lotteries,
competition among banks include front liners, pricing, facilities
and access, network (number of branches and the locations) and
promotion for position and awareness.
The internationalization of banking may have contributed to
the competition in the domestic sector especially when the public
lost their confidence of the local banks. New competitive
pressures are emerging from abroad, owing to the liberalization
of international banking and capital flows, and as a result of
the adoption of new banking technologies.
Eventually, the climate in Indonesia's banking sector has by
now changed as analyzing certain conditions of a particular bank,
whether it will be liquidated or recapitalized, can now be seen
in public. This shows a good change for a much better condition.
But the public must realize that never to save money in a bank
simply because the prizes and rewards. It's hard to stop one to
do with their money, indeed, but it will be much better and safer
to learn the whole performance of the bank first before having
trouble to get back your buck.
And don't forget that banks and the banking system have a
special status, mainly because they are regarded as more
vulnerable to instability than other firms or sectors.
Much more, banking activities in Indonesia are still facing
existing problems such as the fragile economic situation; while
excessive competition is also harmful which may create an
important source of bank failures.