Financial Management & Digital Banking: A New Proposition (Part 1: Early Adopter Segment)

Background and Market Research

Helsa Tanaya
7 min readJul 14, 2020

Corporate Strategy

For the last few years, Tunaiku’s lending product has reached tremendous growth. However, to balance out the ratio between lending and funding, we must boost the third-party funding as well (saving products). As these products will be the ones that generate and become the source of funding for our lending products.

Furthermore, our third-party fund still relies heavily on the corporate funding side, which has a high volatility due to the nature of its business (it is highly dependant on the clients, and while a small number clients can pour a large sum of money, when they pull out we will lose the majority of our assets as well). Therefore, there is a push to create more initiatives and products that can attract retail customers and retain them so that we have a much more diversified portfolio, and a stronger funding sector that can support our lending as well.

Background: Market Potential

Acquisition and growth of digital banking: the high growth of adoption and usage of digital banking in Indonesia
In Indonesia, the combination between the increasing penetration of internet access, especially on mobile devices, the growth adoption of mobile phone. While the penetration of banking, especially digital and internet banking is still low → this presents a good opportunity for us to introduce a digital banking that’s easily accessible through mobile phone. This finding is based on McKinsey’s report (Digital banking in Indonesia: Building loyalty and generating growth):

Indonesian consumers are very open to digital banking. Over the past three years, monthly usage of digital banking channels in Indonesia has grown twice as fast as other Emerging Asian markets. Furthermore, 55 percent of nondigital customers said they were likely to use digital banking in the next six months; this is the second-highest figure for any country in Emerging Asia, after Myanmar (Exhibit 1).

McKinsey & Company: Digital banking in Indonesia: Building loyalty and generating growth

The survey also points to an opportunity for purely digital players: about 50 percent of all respondents would consider shifting to a bank without any physical presence, and a majority of those respondents expressed confidence that they would shift 25 to 50 percent of their balance to a pure digital bank.

However, despite the large potential in Indonesian market and significant growth in digital banking (proliferation of digital banking products), the penetration of digital banking itself is quite small when compared to the overall Indonesian population. As stated in The Jakarta Post’s article Digital financial services booming but still lack users:

“We have actually grown faster than emerging Asia-Pacific countries in internet banking, smartphone [ownership] and overall digital [service usage],” said Guillaume de Gantès, a partner at McKinsey’s Indonesia office. “However, while we also have robust penetration of nonbank services, One of the reasons for such low usage, de Gantès said, was because Indonesians still favored services provided by conventional lenders over financial technology providers, such as peer-to-peer lending and payment systems. Indonesia, like India, remains a cash-intensive country, so [digital financial] solutions tend to be cash replacements. it has only penetrated about 5 percent of the population,” he said.

One of the reasons for such low usage, de Gantès said, was because Indonesians still favored services provided by conventional lenders over financial technology providers, such as peer-to-peer lending and payment systems. Indonesia, like India, remains a cash-intensive country, so [digital financial] solutions tend to be cash replacements.

So there is still a question that we need to dig deeper: with the fast growth of mobile tech adoption, internet access and proliferation of digital banking products, why do Indonesians still have very low adoption of digital banking services?

And this question begs another question: which segment is the better one to target? Is it the large, untapped unbanked segment that has low competition in the financial sector but has high cost and risk for adoption, VS the digitally savvy banked population that has higher readiness for adoption, but already targeted in a saturated market?

Problem and questions that we need to answer:

  • Who is the most profitable segment to target?
    → Segmentation with the biggest opportunity size and target for early adopter
  • What kind of digital banking services that this segment need and desire? → for acquisition, product-solution fit
  • How do we differentiate ourselves from other competitors?
    → acquisition, product-market fit
  • How to create a banking product that is highly engaging and fulfilling in order to create good retention and loyalty?
    → for retention, product-market fit

Research and Findings

Who is the most profitable segment to target? → Market research to identify the segment who has the highest opportunity size for our target audience

To determine the opportunity size, we assess it based on these categories:

Serviceable and obtainable: meaning, this segment is available, has wide enough population, is highly/easily accessible and shows its readiness to adopt our product:

  • Accessibility: in terms of geographical location and infrastructure needs, can be easily reached
  • Obtainability: the population also has ticked off the key indicators that demonstrate readiness to adopt our product

High adoption / acceptance rate: the population also has high level of needs and demand for the value that we offer

It is much more feasible and to target urban, digitally savvy population that already has a degree of financial literacy. This decision is based on the findings from literature researches:

Despite the size of the market, the country’s readiness to maximise the use of digital financial services remains low

According to the Financial Inclusion Insights survey in 2016, 43% of mobile phone users in Indonesia have a smartphone, but only 5% of phone users had ever made financial transactions on their phone (Financial Inclusion Insight, 2017).

Cash remains the preferred mode to do transactions with banking services as the next option. Incidentally, not only bank branch penetration among adults is low, ownership of accounts that are accessible on a mobile device is one of the lowest in the region, at only about 3.1% of the adult population in 2017.


The banked has a higher adoption rate and readiness for digital financial services. This is evident by comparing the key indicators of readiness for digital services in banked vs unbanked population:



2. Digitally active consumers are more valuable

From McKinsey’s report (Digital banking in Indonesia: Building loyalty and generating growth):

The percentage of Indonesia’s banking consumers that are digitally active has grown 2.5 times since 2014, and they now comprise 32 percent of the banked population. This growth becomes even more significant in light of the fact that digitally active consumers are more valuable in an economic sense to banks. Two metrics from our research underscore why this segment will be so important for Indonesian banks seeking growth:

  • Loyalty: Digitally active consumers are twice as loyal as nondigital consumers.
  • Purchase activity: Digitally active consumers bought twice as many banking products in 2017 compared to nondigital consumers, and currently own 1.5 times more products than nondigital peers (Exhibit 2).

Conclusion (Early Adopter Segmentation)

It can be concluded that the segment that has the highest adoption rate and readiness to digital financial services are the banked population, specifically:

the younger, urban people who has higher income that can be allocated for savings and other transactional purposes. They are the low-hanging fruit that is the most approachable because:

  • they already have the key indicators of high adoption (ownership of smartphone, good internet access, sufficient dispensable income for savings)
  • and have the demands for savings (good financial literacy, have life goals/needs that they want to achieve by saving).

This contrasts with the unbanked population that:

  • requires higher cost for adoption (lack of smartphone and dispensable income for savings, needs for agents to reach and teach them how to use financial services)
  • and low demand for digital banking and savings, as these low-income segment have a more pressing needs for payment and transfer products.

Furthermore, within the banked population, the digitally active segment is also the most valuable ones because they have the highest retention in terms of brand loyalty and and in purchasing multiple products. So they have the most potential in not just being the easiest to acquire, but also to be retained and to be cross-sold to other financial products.