2019 8th International Congress on Advanced Applied Informatics (IIAI-AAI)

Digital Banking Transformation:

Application of Artificial Intelligence and Big Data Analytics
for Leveraging Customer Experience in the Indonesia Banking Sector
Elisa Indriasari Ford Lumban Gaol Tokuro Matsuo
Doctor of Computer Science Doctor of Computer Science Bina Nusantara Professor at Advanced Institute of
Bina Nusantara University University Industrial Technology
Jakarta, Indonesia Jakarta, Indonesia Japan
[email protected] [email protected] [email protected]

Abstract— Discussions related to the Digital Banking (DB) Aligning to the global trend, the banking sector in Indonesia responds
transformation has become the main issues in the industry to these customer behaviors shifting by progressively offering
nowadays. Digital disruption has changed the way peoples do sophisticated Digital Banking (DB) products and services.”
business and perform transactions. However, the bankers still
found many problems when performing DB transformation. Main Massachusetts Institute of Technology in the “Digital Banking
issues on DB transformation are that many banks still assume that Manifesto: The End of Banks”, describe the future of Digital Bank as
digital transformation is about workflows and systems rather than follows:
focus on customer experience. The unsatisfactory state of affairs with existing banks opens a
unique opportunity for building a digital bank from scratch. Such
Nowadays, Artificial Intelligence (AI) and Big Data Analytics a bank will fulfil its mission by utilizing the most advanced
(BDA) have risen and played as an important role in the new technologies, including cryptography and distributed ledger
banking era. The recent trend of AI and BDA enable banking to techniques, artificial intelligence, big data, and deep learning. The
be more customer-centric based on data driven. Personalization bank will liberally apply artificial intelligence and big data
service becoming an important strategy for leveraging the existing analytics for creating unparalleled customer experience,
customer engagement, and attracting potential customer become automating personal and SME credit issuance, and improving risk
new customers. management..[4]

This study explores the application of AI and BDA in banking Figure 1 showed the Indonesia consumer demographics in 2018. The
for leveraging customer experience. This study used literature rise of the Internet has significant impact to the consumer behaviors in
review and interviews to gather the data. We interview more than many industries, including the banking sector in Indonesia. In 2018,
some persons in Indonesia banking industry to get the insight on according data from Central Bureau of Statistics (BPS) 57,33% have
the implementation of AI and BDA in Indonesia. The paper internet access and 50,4% Indonesian peoples using the internet every
reveals best practices of the global banking and Indonesian day.[5] The other phenomenon in the Indonesia consumer
banking, in the implementation of AI & BDA. The contributions demographic is the growth of smartphone users. Based on a report
of this study are proposed enterprise architecture and published by “We are social”, 50 million Indonesian peoples have
recommended digital innovation in AI and BDA that enables smartphone [6]. This demographic situation forces Indonesian banks
banking institutions to leverage customer experiences. to create a smartphone based mobile specific strategy to service their
end customers. [7]
Keywords—Digital Banking Transformation, Artificial
Intelligence, Big Data Analytics

I. INTRODUCTION
Nowadays, the Internet has established itself as a tool that not only
shifting the way customers make purchasing decisions, but also how
institutions conduct business.[1] The lives of ordinary consumers have
transformed in the past 20 years. Arise of mobile computing devices,
such as tablets, smartphones, and innovations like GPS have
significant impact to customer behaviors. Customers connected and
interacted more with their friends and environment. They also used a
whole variety of service providers in a completely different way
compared to early 1990s. [2]

The change of customer behaviors created digital disruption, a

phenomenon that changes all industrial landscape and its operations.
Today's competitive market, indicated by global economic integration
into volatile business environment. This condition being challenged to
all business sector including banking because the product and service
life cycle be shorter. Rapid growth of information technologies and
electronic communication, puts emphasis on banks to continuously
expand, by shifting its competitive dynamics and strategic context. [3] Fig. 1 Indonesian consumer banking demographics in 2018 [5] [6][7]

978-1-7281-2627-2/19/$31.00 ©2019 IEEE 863

DOI 10.1109/IIAI-AAI.2019.00175

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The revolution of DB in Indonesia started when many national banks operation and creating more personalized banking products and
adopted Internet Banking and Mobile Banking in early 2000s. services to win the heart of customers. The adoption of AI and BDA
Nowadays, the composition of the banking transaction in Indonesia are part of Digital Banking transformation strategy to achieve strategic
has been changed. Transaction performed via branches have converted positioning among competitors.
to transaction via digital banking channels. [7]
This study explores the application of AI and BDA in Banking for
The result of the survey report published by PwC in 2018 found that leveraging customer experience based on Indonesia banking sector as
mobile and internet are the top channel for customers to conduct the empirical study case.
transactions. Compare to the year 2015, traditional branches no longer
dominate the transactional landscape. For many banks even though the The research contributions of the paper in the academic and practice
volume of transactions decreases, the value of transactions through the world are as follows:
branch is still high. [7] In the next future, it’s not a surprise that the x Provided related works in the application of AI and BDA in the
pace of technology change, will shift Indonesian banking customers to banking sector globally.
be more cashless society. x Provided an analysis of the application of AI and BDA in the
Indonesia Banking Sector.
Responding to the new competition, technological adaptation and x Explored Manager’s perceptions on impact of implementation of
strategic positioning, the traditional banks in Indonesia which commit AI and BDA to the customer experience.
to digital banking are undergoing a transformation which allows them x Investigated challenges that are to be faced when applying AI and
to position themselves within the new ecosystem. The Digital Banking BDA in the banking sector.
transformation depends on the set of circumstances with which each x Proposed enterprise system architecture and recommended digital
institution starts out, although it is evident that there are several phases innovation that enables banking institutions to leverage customer
depending on the maturity level of the bank. Figure 2 shows the experiences.
process of transformation of Digital Banking. [8] x Proposed the application of AI and BDA in the banking sector-
based on CIOs or IT Executive perspective in Indonesia.
Bank CIOs in Indonesia believe that the rise of technologies: Artificial
Intelligence (AI) and Big Data can be used for improving the banking

Fig. 2 Digital Banking Transformation [8]

II. RELATED WORK “a computer system that can sense, comprehend, act and learn. In
This section provides the brief discussions on the definition, the other words, a system that can perceive the world around it,
concept and some existing work of applying AI and BDA in the analyze and understand the information it receives, take actions
banking sector. based on that understanding, and improve its own performance by
learning from what happened. And by enabling machines to
A. Definition and concept of Artificial Intelligence interact more naturally – with their environment, with people and
AI will impact on and applicability for individuals and businesses with data – the technology can extend the capabilities of both
today and tomorrow. AI is having a significant impact on the lives of humans and machines far beyond what each can do on their own.”
consumers. Accenture, a leading consultant defines Artificial [9]
Intelligence (AI) as:

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Today, banking Institutions are entering the intelligence age. Artificial analysis and fraud detection. These approaches can lead to more
intelligence enables banking institutions to entirely redefine how they intelligent transactions, which can assist organizations to manage risks
make innovative products and services, how they operate, and how and provide more personalized services, thus to get a higher degree of
they create sophisticated customer journey and turn customer competition advantage.[12] The capabilities to implement both AI and
experiences. BDA will benefit banking institutions on many aspects, including
provide much valuable information for organizations to achieve more
intelligent systems. This competence will support business for gaining
a great competitive advantage.

C. Customer Experience Innovations using Digital Banking

Customer loyalty considered as a key factor to survive and success in
many services business, including in the banking sectors. In retail
banking, customer loyalty influenced by perceptions of service quality
and levels of customer satisfaction [13]

Understanding customer experience and evaluating customer journey

over time is critical for bank institutions in the current banking era.
This approach will improve the service quality and level of customer
satisfaction. The increasing focus on customer experience arises
because nowadays customers interact with firms through myriad touch
points in multiple channels and media, resulting in more complex
customer journeys.[14]
Fig. 3 Artificial Intelligence [9]
Digital banking innovation can be implemented for leveraging
The techno bankers are looking for ways to effectively implement AI customer experience. The main roles of AI and BDA technologies in
technologies into their businesses and, therefore, drive value. Not the development of digital banking innovations are as follows:
all technologies are worth investing in. Figure 3 represented Artificial x Technologies enable banking institutions analyse on entire
Intelligence Technologies that have developed today, including: (1) customer journey and experiences on each DB channels.
Natural Language Processing (2) Deep learning (3) Intelligence x Technologies can be used to find patterns of usage that generate to
automation (4) Computer vision (5) Neural Networks (6) Machine sales, and analyse underperformance DB channels. From this
Learning (7) Video Analytics. knowledge, banks can create strategy to optimize each DB
channels.
The bank institution should identify the strategy of product and service x The technologies can deliver memorable moments that drive
development, and furthermore identify the technologies that can be satisfaction, loyalty and recommendation, and improve financial
adopted for supporting the business, including methods and algorithms performance.
that can be used in AI and BDA for solving business problems.
III. RESEARCH METHODS
B. Definition and concept of Big Data Analytics A. Research Process Flow Chart
Figure 4 show the research process flow chart.
AI does not do much without data; Currently bank institutions
encounter exploded of data. Supported by BDA, AI can select,
interprets and analyzes the data, acts on the data, and or gives
suggestions to make informed decisions. Big Data Analytics has been
popular over the last few years. The definition of big data is as follow:

TechAmerica Foundation defines big data as follows:

“Big data is a term that describes large volumes of high velocity,
complex and variable data that require advanced techniques and
technologies to enable the capture, storage, distribution,
management, and analysis of the information.” [10]

IBM, a leading IT company defines big data analytics as follows:

“Big data analytics is the use of advance analytics techniques
against very large, diverse data sets that include structured, semi-
structured and unstructured data, from different sources and in
different size from terabytes to zettabytes.”[11]

Big data can supply financial organizations with more business

opportunities and the potential to gain a more holistic view of both
market and customers. Big data analytics offers benefit to the banking
sector in many aspects, such as accurate customer analytics, risk
Fig 4. Research Process Flow Chart.

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The research conducted in 4 phases: (i) problem definition; (ii) IV. RESULT & DISCUSSION
literature review; (iii) data collection; (iv) Qualitative Data Analytics
(v) result & conclusion. Figure 4 describe the research process A. Application of Artificial Intelligence and Big Data
performed in this research. Analytics in global banking
The arise of AI have a significant impact on the lives of consumers
B. Data collection
today and tomorrow. AI-powered technology is making inroads into
We conducted qualitative research, based on analysis to the primary humans everyday life. AI is also having a transformative effect on an
and secondary data. The figure 4 show detail data collection used for industry that impacts virtually all consumers and businesses including
research. the banking sector. Table 2 represented implementation of Artificial
Intelligence in many global banks.

Table 2. Implementation of AI in many global banks[16]

Bank Functional Area
Bank of America Chatbot & AI-enabled tool that provides
financial guidance for the bank’s clients
through voice and text messages.
JPMorgan Chase Mobile apps (finn) for creating customer
interactions easier and attracting new
Fig 5. Data Analysis clients, especially millennials
Wells Fargo Mobile apps (greenhouse) for creating
Primary data collected by researching using the in-depth interview customer interactions easier and attracting
method. The research participants are CIO or Head of IT from eight new clients, especially millennials
bank institutions. In-Depth interviews were selected as the main City Bank Fraud Detection
method of data collection because the method can explore issues in JPMorgan Process Automation
depth and detail. [15]
Table 3. Implementation of Big Data Analytics
The initial draft of the interview script was tested by two participants
in many global banks[17]
from different institutions for ensuring validity. The pilot feedback
Bank Objective
helped to remove ambiguity and reframe questions that were not
HDFC Bank Provide more relevant content. the right
clearly understood by the participants before the main interviews
OCBC Bank content at the right channel.
Bank of China
Table 1. showed questions asked in the interview GE Capitals Recognize multi-channel behaviors that lead
to sales. GE Capital has optimized its
Code Questions customer’s experience across online and
Q1a Have your institution implemented Artificial Intelligence offline channels, increasing both customer
(AI)? satisfaction and marketing efficiency.
Q1b If you have implemented AI, what features have been HSBC Guide customers to low cost channels
developed? PKO Bank Measure marketing effectiveness across
Q2a Have your banking institution implemented Big Data Polski channels using a multi-channel campaign
Analytics? management platform
Q2b If you have implemented Big Data Analytics, what Laurentian Perform marketing campaigns across its
features have been developed? Bank of Canada various channels
Q3 In your opinion, what challenges will arise when your
institutions implement AI and Big data analytics?
Q4 In your opinion, are the implementation of AI and Big Data
Analytics can leverage customer experience? What B. The Application of Artificial Intelligence and Big Data
potential application will be prioritized to implement to Analytics in Indonesia
enhance customer experience. Please describe. The application of AI Big Data in Indonesia still in the early state. We
Q5 Could you please describe the IT architecture of your conduct observation and interview with key persons in Indonesia
Digital Banking that includes the implementation of AI banking sector, we found that many banks start to implement AI by
and Big Data Analytics? providing chatbot for personalizing customer service since 2018. The
chatbot developed using Natural Language Processing (NLP). Other
To support our primary data findings, we also collect secondary data. AI features that have developed by Mandiri, and CIMB Niaga are
Secondary data are data collected by other researchers or institutions. fraud detection. CIMB Niaga also have adopted AI in area process
automation.
We analyzed secondary data for answering research questions,
including the implementations of AI and Big Data Analytics in global Table 4. Implementation of Artificial Intelligence in Indonesia
banking. The data analyzed by Qualitative Data Analysis (QDA). Features Bank
Chatbot Mandiri, BCA, BNI
Fraud Detection Mandiri, CIMB Niaga, Danamon
CRM Danamon, BNI

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 Table 5. Implementation of Big Data Analytics in Indonesia c. Customer Relationship Management
AI and Big Data can be utilized for knowing customer behavior,
Features Bank
pattern, and expectation. The Banks also need to perform cross
Fraud detection and prevention Mandiri, Danamon selling and up selling.
Customer segmentation Mandiri, BCA, BNI
d. Preapproved loans offered through Channels There are
Danamon, opportunities to perform preapproved loans offered through
Risk management Mandiri channels: Mobile Apps, Chatbots.
Past data analytics and future Mandiri, BNI e. Fraud Detection to identify anomaly transactions.
prediction f. Faster response to the service inquiry based on the service usage
Provide more relevant content, the Danamon, BNI pattern.
right content at the right channel
Recognize multi-channels behaviors BNI D. Proposed Enterprise Architecture
that lead the sales
Guide customers to low cost channels BNI Digital transformation is essential to the customer experience.
Measure marketing effectiveness BNI Becoming a Digital Bank that goes beyond the customer experience is
across channels campaign the challenge for all banks as customers’ demands new services
management platforms focused upon 21st century technologies.
Perform marketing campaign across Mandiri, BCA, BNI,
its various channels Danamon There are many reasons why Enterprise Architecture of DB needed:
x Bank Institutions need to have roadmaps for achieving a standard
enterprise system architecture that enabling two technologies AI
C. Challenges & Opportunities and BDA running well in systems and contributing to the better
performance of the banking business and operations.
Nowadays Bank Institutions in Indonesia are still in the early phase of
x Developing the bank’s core systems to become a truly Digital
AI and BDA implementation. They still in the ‘explore and
Bank is the hardest challenge of all.
experiment’ phase to apply the technologies in daily services. The
banks still investigate on the challenges and opportunities by the rise
We proposed Digital Banking Enterprise Architecture that can
of AI and BDA. They also in the phase of exploring the application
improve the customer experience as showed in Fig 6.
that fit to the Indonesian customer need. The banks executive should
assure that the adoption of this latest technology can benefit to the bank
and the technology investment will definitely pay back to bank. V. CONCLUSIONS
Based on in-depth-interview and Qualitative Data Analytics, the
challenges of AI and Big Data implementation in Indonesian Banking AI and BDA are currently being implemented by the banking sector of
Sector are as follows: various countries, including Indonesia. The power of the technologies
a. Infrastructure limitation must be utilized by Indonesia banking sector to improve its products,
Banking institutions need to modernize their banking services and operations. In order to get benefits of the technology’s
infrastructure. banks need to upgrade their traditional technological approach and
b. Data accuracy start focus on digital banking transformation.
To take advantage of the application of AI and BDA technologies,
banks need to ensure data quality. Without accurate data, banks Each bank’s responds to the technology adoption will depend: (i) the
could hurt the user experience that they are trying to enhance. bank’s current position, (ii) goal for the future, (iii) customer focus,
c. Legacy technologies lacking integration capabilities (iv) organizational capabilities, (v) brand promise, (vi) regulatory
d. Regulatory constrains situation and (vii) capital constraints. Banks should consider the
e. Inflexible business process and teams technology and features they wish to adopt. Every bank needs to
f. Lack of properly skilled team develop a strategy to settle these challenges and grab the opportunities.
g. The cost for adopting AI and BDA might be high
This study contributes to Information Technology literature in terms
Based on In-depth interview, CIOs or IT executives in the banking of providing Enterprise Architecture for Digital Bank that enable AI
sector believes that the implementation of AI dan Big Data Analytics and BDA technologies. The results of the study offer CIOs or IT
can leverage customer experience. The potential AI and Big Data Executives understanding of application AI and BDA in the Banking
application that will be prioritized to enhance customer experience are sector that enhance customer experience. The findings emphasize
as follows: many features that can be implemented, and identify challenges should
be considered to gain a more holistic and comprehensive
a. User interaction and personalization. understanding of application AI & BDA globally and locally in the
The customers expected more personalize service. They want their Indonesian banking landscape.
banking partner to securely manage their finances, understand
their preferences and financial goals. This personalized Future research agenda with more banks as participants and the other
engagement will differentiate itself not only from other banks but research focus on the customer experience will be useful for the
from fintech start-ups as well. bankers to get customer perspective. And finally, the bankers can align
customer expectation to the Digital Bank strategy.
b. Products and services usage optimization.
Optimizing product and service allows banking institutions to
create an attractive value proposition to the customers.

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 Fig 6. Digital Banking Enterprise Architecture

Watch, no. January, pp. 1–10, 2015.

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