Just a decade ago, perhaps if I left the house and forgot to bring my wallet, I would turn around and go back home, even if I was halfway to my destination.
However, nowadays, forgetting my wallet is not really a big deal, as long as I have my smartphone in hand.
We can all agree that today's payment preferences, as well as the systems to handle them, have changed. The pandemic has been the single largest catalyst in the move away from cash. Even merchants that typically see higher levels of cash payments have felt the shift.
According to PwC consumer research, major card brands have reported a doubling of tap-to-pay transactions in everyday segments such as grocery and pharmacy. Additionally, there has been an increase of over 10% in their consumer penetration.
In line with this trend, Bank Indonesia has reported that the transaction volume using QRIS in the country reached 1,595 bn transactions as of October 2023. The QRIS transaction amount soared by 186.08% YoY, reaching approximately ~Rp 25 tn.
In response to the current situation, businesses operating in the payment ecosystem are actively exploring and implementing various strategies to adapt. Notably, Bank Syariah Indonesia (BRIS), as one of the QRIS service providers, has demonstrated resilience and growth, experiencing a substantial 79.44% YoY increase in its merchant base.
Taking a progressive approach, BSI has expanded its QRIS services beyond national borders, now reaching neighboring countries: Thailand, following its expansion to Malaysia, Singapore, and the Philippines.
This recent expansion is not the only latest news; there's also an update from the Emirates, where Bank Syariah Indonesia has successfully obtained full operational business licenses in Dubai, United Arab Emirates (UAE), where the opportunity for Sharia banking penetration is still considered quite substantial in that region.
With this license, BSI can enhance global opportunities for Indonesian businesses in the UAE and the Middle East, particularly fortifying the domestic halal industry and Islamic finance sector for entrepreneurs seeking expansion.
As the largest Sharia bank and the sixth-largest bank in Indonesia, BSI will establish new branch offices there in Dubai, adding to the existing 1,200+ branches it already owns.
As we know, Indonesia's economic growth continues to heavily depend on household consumption and this is aligns with BSI's current focus, where consumer financing remains the primary driver of its growth. Considering the current customer penetration still around 7%, there is still significant untapped potential that BSI can further enhance.
Beyond that, financing in the wholesale segment (corporate and commercial) has demonstrated a notable uptick, too. This growth has fostered the 'value chain creation', wherein financing in this segment seamlessly integrates with creating financing in consumer product as well.
Looking from a demographic standpoint, BSI holds a strategic advantage with a customer/debtor portfolio situated in the productive age group. This creates an avenue for BSI to enhance penetration in both financing products and other offerings.
Thus, the challenge for BSI lies not in the demand aspect but in executing these initiatives more expeditiously while maintaining a measured level of risk.
That's why, future expansions will be consistently pursued, particularly in terms of technology, through the Super Apps BSI, currently in the preparation and regulatory approval stages, estimated to be released in 2024.
Considering the aforementioned factors, our confidence in BSI remains steadfast. The bank consistently showcases positive performance, with profitability driven by significant improvements in both asset quality and cost efficiencies.
Not to mention, its commitment in promoting Wadiah as its funding backbone has proven successful, providing crucial support to close the funding gap in savings accounts. This effort has resulted in a recovery of IDR 10 trillion from its lowest point after the IT incident in May.
All in all, our stance remains unchanged – a BUY recommendation for BRIS appears advisable, with a TP of Rp2,540, indicating a 2.7x 2024F PB ratio.