Allo Bank harnesses AI for strategic digital expansion

Allo Bank, under the leadership of president director Indra Utoyo and director of digital Sajal Bhatnagar, is making significant strides in Indonesia’s digital banking landscape. Their strategy centres on strategic digital investment, customer engagement, and ecosystem collaboration to achieve sustainable growth and early profitability.

Digital lending and risk management

A cornerstone of Allo Bank’s strategy is its focus on digital lending and robust risk management. Utoyo emphasised their disciplined approach: “Our digital lending growth has been promising, with manageable levels of risk and improving collectability.” This cautious yet progressive approach has enabled Allo Bank to expand its lending portfolio while maintaining a healthy level of non-performing loans (NPLs).

Utoyo highlighted the importance of building strong digital underwriting capabilities to effectively manage risk. This focus on digital lending is complemented by the bank’s use of artificial intelligence (AI) to enhance underwriting processes, improve customer engagement, and detect fraud.

Bhatnagar added: “We focus on four areas: improving customer engagement, enhancing underwriting capabilities, fraud detection, and smart operational services – increasing the degree and extent of automation.”

Ecosystem collaboration

Allo Bank aims to be both an everyday bank and an ecosystem bank. Leveraging strategic partnerships is vital to their identity and growth. “We are expanding through our ecosystem and strategic partners, which is crucial for our growth,” Utoyo noted.

By integrating into the CT Corp Group’s network and collaborating with other key partners, Allo Bank offers a seamless banking experience that fits into the daily lives of its customers. This approach not only broadens the bank’s reach but also enhances its ability to provide comprehensive financial services. The bank’s strategic ecosystem collaborations help it navigate the competitive digital banking environment in Indonesia.

Technological innovation and customer-centric products

Allo Bank is investing significantly in AI and technology to improve customer engagement and operational efficiency. The bank’s innovative product offerings, such as the Allo Grow, reflect its commitment to customer empowerment and transparency. This product allows customers to earn daily interest on their deposits, with the flexibility to withdraw funds without penalties.

According to Utoyo, this product has seen a positive reception, with significant growth in customer deposits. The bank's customer base has rapidly grown to 10 million, with its micro, small and medium-sized enterprise (MSME) clientele expanding significantly as well. Utoyo highlighted the success of their digital loan products, including "Pay Later" and “Instant Cash” loans, which have seen increased adoption.

Growth and financial performance

Despite being a relatively new player, Allo Bank is on a solid path to profitability. Utoyo expressed confidence in achieving profitability within three to four years, ahead of the initial five-year plan. This accelerated timeline is attributed to the bank’s disciplined cost management, strategic investments, and robust growth in digital lending and customer acquisition.

In just over two years, Allo Bank has achieved remarkable growth. The bank’s assets have grown to IDR 13.6 trillion (about $850 million), and its equity has reached IDR 7.1 trillion (about $460 million) as of the end of June 2024. Utoyo shared that their daily interest product, Allo Grow, has garnered IDR 115 billion (about $7.2 million) in deposits within eight months of its launch.

Challenges and regulatory compliance

Utoyo acknowledged the challenges associated with rapid digital investment, particularly in regulatory compliance and cybersecurity. “We are investing heavily in cybersecurity and regulatory compliance to ensure operational resilience and protect our customers,” he said.

The bank’s strategic use of cloud services and data-driven decision-making further strengthens its operational resilience. Allo Bank has also separated its data centre from Bank Mega to ensure better control and resilience, launching its own dedicated data centre in May 2024. This move supports the aim to maintain high operational standards and safeguard against potential disruptions.

Strategic pillars and corporate values

Utoyo repeatedly emphasised Allo Bank's strategic business focus, encapsulated in three key pillars: targeted customer acquisition, engagement, and monetisation. This structured approach he feels underpins the bank's efforts to capture market share and foster customer loyalty. Additionally, Allo Bank's corporate values are embodied in the acronym DIGITAL: Data-driven decision-making and problem-solving, providing positive Impact to stakeholders, continuous Growth through strategic partnerships, work In harmony in a result-oriented manner, Transparency with customers and stakeholders, Agility in responding to market changes, and a Learning culture that encourages continuous improvement. These values guide Allo Bank's operations and strategic decisions, ensuring they remain focused on long-term growth and sustainability.

Barriers to financial inclusion

Bhatnagar also addressed one of the key barriers to financial inclusion in Indonesia: the relatively high cost of internet services and WiFi access. “The cost of internet is a significant barrier. In countries like India, affordable internet has driven financial inclusion from 50% to 85%. Indonesia needs similar policies to reduce internet costs and promote digital access,” Bhatnagar explained. This insight underscores the necessity for policy interventions to support digital financial services and broader economic inclusion.

Allo Bank’s strategic focus on digital lending, ecosystem collaboration, and technological innovation positions it well for continued growth and early profitability. With a customer-centric approach and strong risk management practices, Allo Bank is poised to become a significant player in Indonesia’s digital banking sector. Utoyo and Bhatnagar’s leadership and vision drive the bank’s efforts to create value through disciplined growth, leveraging technology, and building strong partnerships. The clarity of their strategic vision, values, and governance, combined with the substantial investments to ensure operational scale and resilience, underscores Allo Bank’s commitment to leading the digital banking revolution in Indonesia.

Meet Indra Utoyo, Sajal Bhatnagar, Altona Widjaja, and Edisono Limin, along with decision-makers and practitioners, at Finance Indonesia on 12 September 2024.
Click here: https://theasianbanker.com/finance-indonesia-2024/