Traditional Banks - Indonesia

Indonesia

In 2024, the projected Net Interest Income in the Traditional Banks market market in Indonesia is estimated to reach US$43.22bn.
It is worth noting that Traditional Commercial Banking is the dominant segment in this market, with a projected market volume of US$33.99bn in the same year.
The Net Interest Income is expected to exhibit a Compound Annual Growth Rate (CAGR 2024-2028) of -7.41%, resulting in a market volume of US$31.76bn by 2028.
When compared globally, in China is expected to generate the highest Net Interest Income, with a projected amount of US$4,690.0bn in 2024.
Traditional banks in Indonesia are facing increasing competition from digital banking platforms, leading to a shift in consumer preferences.

Key regions: Singapore, United Kingdom, Germany, Brazil, United States

Definition:

The Traditional Retail and Commercial Banks market refers to the financial services sector that provides a range of financial products and services to individuals and businesses through store-based branches and other traditional channels. Retail banking focuses on offering financial services to individual consumers, such as personal loans, savings and checking accounts, credit cards, and mortgages. Commercial banking, on the other hand, provides financial services to small and large businesses, including loans, lines of credit, and other financial products designed specifically for businesses.
The traditional banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. These banks have a long history of serving customers and have established relationships and a deep understanding of the financial needs of their communities. They offer a wide range of services and are able to provide personalized advice and support to their customers.
In this market, banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. However, they also face challenges, such as increased competition and changing customer preferences, which are driving the need for continuous improvement and adaptation.
Overall, the traditional retail and commercial banking market provides a wide range of financial services to both individuals and businesses through established, trusted channels and continues to play a vital role in the financial landscape.

Structure:

The market consists of two segments:
- The Traditional Retail Banks market refers to financial services provided to individual consumers (e.g., personal loans, savings and checking accounts, credit cards, mortgages).
- The Traditional Commercial Banks market refers to financial services provided to businesses, including small and large enterprises (loans, lines of credit, other financial products specifically designed for businesses).

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Industrial and Commercial Bank of China Ltd., JPMorgan Chase & Co., and HSBC Holdings.

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Analyst Opinion

The Traditional Banks market in Indonesia is experiencing a shift in customer preferences towards digital banking services, driven by the increasing penetration of smartphones and internet connectivity in the country.

Customer preferences: Indonesian consumers are increasingly turning to digital banking services offered by traditional banks due to the convenience and accessibility they provide. With the rapid growth of smartphone usage and internet connectivity in Indonesia, customers are opting for online and mobile banking solutions that allow them to conduct transactions and access financial services anytime, anywhere. This shift towards digital banking is also influenced by the younger population in Indonesia, who are more tech-savvy and prefer the convenience of managing their finances through digital channels.

Trends in the market: One of the key trends in the Traditional Banks market in Indonesia is the expansion of digital banking offerings by traditional banks to cater to the growing demand for online financial services. Banks in Indonesia are investing in upgrading their technological infrastructure and developing user-friendly mobile applications to enhance the digital banking experience for customers. Additionally, partnerships between traditional banks and fintech companies are becoming more common, allowing banks to leverage innovative technologies to improve their service offerings and reach a wider customer base.

Local special circumstances: In Indonesia, the Traditional Banks market is also influenced by the diverse geographical landscape of the country, with a large population spread across thousands of islands. This presents a unique challenge for traditional banks to provide banking services to customers in remote areas. To overcome this challenge, banks in Indonesia are expanding their branch networks and adopting agent banking models to reach unbanked populations in rural areas. Moreover, traditional banks are also exploring partnerships with local cooperatives and community organizations to extend their financial services to underserved communities.

Underlying macroeconomic factors: The growth of the Traditional Banks market in Indonesia is supported by favorable macroeconomic conditions, including steady economic growth, rising household incomes, and government initiatives to promote financial inclusion. As the Indonesian economy continues to expand, there is a growing demand for banking services, including savings accounts, loans, and investment products, driving the growth of traditional banks in the country. Additionally, regulatory reforms and initiatives by the government to strengthen the banking sector and enhance consumer protection are further contributing to the development of the Traditional Banks market in Indonesia.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.