Indonesia finance firms face narrowing window to monetise AI, BCG says

Financial institutions are entering a new AI-driven “intelligence war” focused on products and operations.

Indonesia’s banks and insurers risk missing the next phase of competition if they continue treating artificial intelligence (AI) as a technology pilot rather than a business transformation strategy, according to Boston Consulting Group.

Speaking at the Asian Banking & Finance and Insurance Asia Summit in Indonesia, Miftah Mizan, a BCG partner, said the country has largely succeeded in expanding digital financial access, but financial institutions are now entering a new “intelligence war” centred on AI-driven products, operations, and customer engagement.

“Digital was about access; AI is about intelligence,” Mizan said. “The decisions made in the next one or two years will determine who leads that story.”

Indonesia’s financial sector has posted strong digital adoption metrics in recent years, including rapid growth in digital payments and financial inclusion levels reaching around 80% nationally, according to Mizan.

However, he warned that profitability pressures are beginning to mirror trends already seen in more mature banking markets.

BCG research cited during the presentation showed global retail banking revenue pools continuing to grow, whilst profitability has weakened in several regions due to compressed margins, stagnant fee income, rising technology maintenance costs, and increasing compliance expenditure.

Mizan said Southeast Asia’s banking sector remains relatively resilient but is beginning to face similar pressures.

“The sector needs a step change,” he said. “Cost optimisation alone will not be enough to close the gap.”

BCG’s global survey of more than 1,000 companies found that only 5% have successfully generated value from AI at scale, despite widespread executive-level commitment to the technology.

According to Mizan, many financial institutions remain trapped in fragmented AI experimentation, with projects spread across multiple departments without clear commercial accountability. “AI is already everywhere in the conversation, but it is still largely missing from the P&L.”

He also pointed to legacy infrastructure and governance challenges as barriers to scaling AI initiatives, particularly in banks and insurers balancing investments between maintaining existing systems and building future-ready capabilities.

Mizan argued that institutions gaining traction are those restructuring their operating models around AI rather than simply layering AI tools onto existing processes.

“Institutions taking an AI-first approach are proactively working with regulators to define guardrails early, rather than treating compliance as a later-stage exercise,” Mizan said.

BCG also expects AI agents—systems capable of autonomously executing tasks—to become a major contributor to banking value creation over the next few years.

Mizan said the technology was “barely discussed” in 2024 but could account for nearly 30% of AI-driven value in financial services by 2028.