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.