Bridging the Gap, AI-Based Solutions for Underbanked Communities in Indonesia

(Doc. Ada Kami)

JAKARTA - The combination of artificial intelligence (AI) and big data can be a powerful weapon for financial industry players to reach and serve underserved communities, especially in countries with a wide geographical and cultural diversity and backgrounds such as Indonesia. With economic growth projected to be as fast as China in the next few years (World Bank, 2020-2028E) and the latest Indonesian Financial Inclusion Index of 75.02% (OJK and BPS, 2024) which still has the potential to grow, the use of AI and big data can be the key to bridging the credit gap and increasing financial inclusion nationally.

Through the use of AI and big data, financial institutions are able to get a clearer picture of potential customers, especially those from underserved and underbanked communities. This technology can answer the needs of consumer profile mapping and risk management, which are the main foundations in providing financial services.

AdaKami Chief Technology Officer, Dr. Ming Gu, explained in his session at the Tech in Asia Conference 2024, “Often, potential borrowers have little or no formal credit history, because they have never had a loan or taken out installments. If credit bureau data is not available, then alternative data sources can be used to assess creditworthiness. To carry out this assessment and analysis, big data is the right technology. This is the core of fintech, especially in the technology aspect.”

Dr. Gu explained that AdaKami uses alternative data sources to analyze patterns and behaviors to get a clearer picture of a potential borrower’s credit score or profile. Although relatively complex when compared to traditional methods, this process allows AdaKami to serve a wider segment of society more effectively, without relying too much on credit bureau data.

In addition to analyzing patterns and behaviors, technology also plays a role in detecting fraud, which is an important part of risk mitigation in the fintech industry. “We use fraud prevention technology to detect image-based fraud attempts, such as manipulation of ID card photos using AI. We are also proactive in our efforts to protect personal data by utilizing data obtained from legitimate sources for customer profile mapping and risk mitigation purposes. AdaKami implements strict measures in maintaining data privacy to ensure that sensitive information is used responsibly and securely,” added Dr. Gu.

Furthermore, Dr. Gu also shared his views on the potential growth of the fintech lending industry in Indonesia. As one of the most populous countries in the world, Indonesia has significant potential to adopt fintech. However, its vast geography, coupled with the limited presence of conventional financial institutions physically, has long been a barrier to access to credit services for most Indonesians, especially those living in rural areas.

“Indonesia consists of thousands of islands, most of which are very remote, without access to physical financial institutions, let alone loan or credit services.” concluded Dr. Gu. “By combining the high internet and smartphone penetration rates in Indonesia, we can provide wider access to financial services to more Indonesians.”

On the other hand, without realizing it, mobile internet has revolutionized the way Indonesians communicate, even in banking transactions. With the presence of AI and mobile technology, the lending and borrowing process on the consumer and service provider side can become more efficient with better risk mitigation and can reach people with inadequate formal credit history.

Finally, along with Indonesia's rapid economic growth, the demand for national credit will also continue to increase. By utilizing AI and big data, financial institutions will be better prepared to meet this need, while ensuring that Indonesia's economic growth benefits all its citizens, bringing the country closer to true financial inclusion.