A shifting landscape for traditional banks in Indonesia

In The Top Up this week, we analyze the digital banking race unfolding in Indonesia and dive into the new PayNow-UPI linkage. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every Wednesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here](. Written by Samreen Ahmad Journalist Hello {NAME} Last week, I went to an ATM after a lull of over six months. These days, I use cards, net banking or [UPI]( for my transactions. I hardly carry any cash now, but this was unimaginable until about five to six years ago. I’ve definitely seen the fintech revolution unfold in India. While digital adoption is rising at an unprecedented pace in the country, there is no dearth of ATMs in my city, Bengaluru, that continue to serve people who prefer cash over digital swipes. However, this is not the case in Indonesia. As local banks such as BRI, Bank Mandiri, BCA, and BNI see a spike in online transactions, they are downsizing their network of branch offices and ATMs. In the Big Story this week, my colleague Budi maps out the top commercial banks in Indonesia and their race to ace digital banking in the archipelago. For our Hot Take, I discuss how Singapore and India recently linked their real-time payment systems and what it means for cross-border payments in both countries. - Samreen  --------------------------------------------------------------- THE BIG STORY [Indonesia’s big four banks are minting it but need to watch their backs]( BRI, Bank Mandiri, BCA, and BNI may boast high net interest margins, but they shouldn’t be complacent.  --------------------------------------------------------------- THE HOT TAKE A new era for cross-border payments Here’s what happened: - Last week, the Monetary Authority of Singapore (MAS) and the Reserve Bank of India (RBI) [linked]( their real-time payment systems to enhance cross-border payment connectivity. - In its first phase, the service is available to India customers of all participating banks in the country and Singapore clients of DBS Bank and Liquid Group. - There is a limit of up to S$200 (US$148.28) per transaction, capped at S$500 (US$370.74) per day. Here’s our take: The PayNow-UPI linkage between Singapore and India officially went live last week, after it was [first announced]( in September 2021. By simply using a mobile phone number, UPI identity, or virtual payment address (VPA), customers of participating banks can send and receive funds between their accounts or e-wallets between countries in real time. Participating banks in India include the State Bank of India, Indian Overseas Bank, Indian Bank, and ICICI Bank. Students, foreign workers, and the Indian diaspora living in Singapore will have the most to cheer about. This cost-effective service is an alternative to traditional remittance provided by the likes of Western Union, which can be expensive, as well as digital remittance providers like Instarem. Around US$1 billion in remittances flow from Singapore to India every year, according to World Bank data. Globally, the average cost of a remittance is around [6.5%](. The number of Indian professionals residing in Singapore has [doubled from 13% to 26%]( between 2005 and 2020. This partnership is expected to bolster remittance and trade flow between the two countries, according to a report by Fitch Solutions. While PayNow and UPI - the most popular way that Indians transact online - are free to use in their respective home markets, it’s not clear if fees will apply for cross-border transactions and if so, how much they will cost. According to a MAS [statement]( participating financial institutions have “committed to ensuring that the service is cost-efficient and accessible.” The linkage will likely be welcomed from the onset, given the large number of consumers as well as local and global firms that have adopted the payments systems. UPI, the inter-banking transfer mechanism that allows instant payment or transfer of funds from one bank or payment app to another, processed nearly [8 billion]( transactions in 2022. Meanwhile, funds transfer platform PayNow facilitated [311 million individual and corporate transactions in 2022]( - that’s more than 2x the 144 million transactions it made in 2020. As Singapore pursues similar linkages with Malaysia’s DuitNow and Thailand’s PromptPay, India is following suit. There have been talks to introduce [UPI in Saudi Arabia]( a region with nearly 3 million residing Indians. If the move pushes through, it could improve investment linkages. Walmart-owned PhonePe, the largest UPI player in India, has already enabled cross-border payments in the UAE, Singapore, Nepal and Bhutan. Through PhonePe’s feature, Indian users traveling abroad can instantly make UPI payments directly from their bank accounts to foreign merchants who have a local QR code. These events could usher in a new age of faster and cheaper cross-border payments. - Samreen --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [GIC-backed Cred rolls out BNPL feature]( The Indian fintech unicorn said the move is designed to simplify the payment process for users and attract more merchant partners. 2️⃣ [Chinese fintech firm IceKredit gears up for SEA expansion]( The AI-focused credit risk and management company sees 30% of its revenue coming from Southeast Asia in the next two years. 3️⃣ [Indian payments firm acquires local one-click checkout enabler]( Prior to this, Cashfree acquired Middle East-based Telr to expand its footprint in the region. 4️⃣ [Jack Ma-backed Ant Group plans to pare stake in India’s Paytm]( The Chinese fintech titan, which is the largest shareholder in Paytm, plans to gradually exit the company.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preferences center. In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com. See you next week! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2023 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894