With some 1,200 branches nationwide, PT Bank Danamon Indonesia (Danamon) claims to be the country’s second largest private national bank and the fifth largest commercial bank. Besides catering to large corporate, SME and retail customers, Danamon also services small proprietary businesses through its micro-financing network.
Called ‘Danamon Simpan Pinjam’ (DSP) by the bank, this network handles loan extensions to small proprietary businesses. “Our micro-financing, or DSP business, started in 2004 to cater to this under-serviced market segment,” says Kanchan Nijasure, chief information officer, Danamon. “In the past, small proprietary businesses could only get financing from relatives, friends, or loan sharks.”
Small loans
Nijasure notes that loan amounts are relatively small in this segment, ranging between US$2,000 and US$3,000. “Most of our small proprietary business customers are not educated and own shops in wet market areas,” he says. “Consequently, it would be difficult for them to get financing if the loan process is complicated.”
Regular collection of loan repayments from small proprietary business customers is very important to Danamon, because the money tends to get spent quickly on other things if left uncollected for long periods, Nijasure says.
In response, Danamon established its DSP network to expedite and simplify the financing process for such customers. The bank has also located its branches in wet market areas and employed local staff to better understand customers’ needs.
Currently, about 10 per cent of Danamon’s assets are involved in the DSP business, according to Nijasure. “Over the past year, we have increasingly used Electronic Data Capture devices (EDCs) to record the amount of loan re-payments collected from DSP customers,” he says. “In future, the mobile EDCs will send transaction information directly to Danamon’s core banking system.”
Effective banking platform
Seeking a flexible, scalable and resilient platform able to support and quickly deliver complex banking services to customers, Danamon turned to Oracle’s FLEXCUBE solution. “FLEXCUBE is a core banking solution, or transaction processing platform, that a bank uses to manage all its transactions,” an Oracle spokesperson says.
In March 2007, Danamon started the FLEXCUBE project as the core banking solution for its bankwide needs. The bank expects the FLEXCUBE deployment to be completed across all its businesses in 30 months.
Goals include improved flexibility in innovating customer services and service delivery across multiple channels. The solution is also expected to provide a single view of the customer across different business segments.
Enterprise-wide deployment
“We have completed FLEXCUBE deployment in Danamon’s DSP business, and are in the process of deploying the solution across its corporate, SME and retail businesses,” the spokesperson says.
According to Nijasure, FLEXCUBE allows Danamon to process savings or current account transactions, time deposits and loan extensions for retail, micro-finance, SME and large corporate customers. “It also gives us the flexibility to provide preferential pricing for customers depending on their transaction volumes and types,” he says.
The DSP business faced significant challenges in deploying FLEXCUBE, according to Nijasure. “This was the first project of such scale that Oracle financial services software has ever deployed for a customer in Indonesia.”
Nijasure says that functionality had to be adapted to the Indonesian banking environment. Additionally, the DSP business involved people-intensive operations across some 700 branches, and hence staff training in handling the new system was critical.
The bank completed pilot testing of FLEXCUBE for its DSP business in December 2007, according to Nijasure. Following that, full deployment across all 700 DSP branches lasted from January to May this year.
“We select a few branches considered to be sufficient from a testing perspective, to tell us whether a FLEXCUBE module can function well in a real life environment,” Nijasure says. “Pilot testing helps us minimise deployment risks.”
In February 2009, Danamon will deploy FLEXCUBE in its pilot conventional business branches, according to Nijasure. Full deployment across all 500 conventional business branches is expected to start in March and end in September 2009.
Improving business value
Nijasure notes that FLEXCUBE has allowed Danamon to easily add new DSP customer data on the system as client numbers increase. Other benefits include faster service delivery and improved system resilience.
“As we only completed actual deployment in May for the DSP business, we will only be able to quantify performance indicators later,” Nijasure says. “However, bringing the system live across all 700 DSP branches in only five months was a significant performance indicator in itself.”
Nijasure foresees additional challenges next year when Danamon deploys FLEXCUBE for its conventional business, which involves multiple service delivery channels and complex banking products. “Connecting FLEXCUBE to other banking systems like internet banking without customer service disruption will be a key challenge.”
“FLEXCUBE has a feature that minimises any inconvenience to conventional business customers, when their data is moved from the old to new Danamon system,” Nijasure says. “For example, they need not change account numbers to use the new system.”
The feature also ensures that customers do not face difficulties in dealing with Danamon through various service channels like ATMs or internet banking during the data migration period, Nijasure says.
