Prone to Cyber Attacks, Banking Sector Increases Capex for IT Investment

27 July 2023, JAKARTA - The banking sector has begun to increase its capital expenditure (capex) disbursement this year to invest in the information and technology (IT) sector in line with the increasing potential for cyber attacks.

Based on data from Checkpoint Research 2022, the financial services sector including banking receives 1,131 cyberattacks every week. Meanwhile, data from the International Monetary Fund (IMF) in 2020 stated that the total annual average loss due to cyber attacks in the financial services sector globally reached around US$ 100 billion.

BNI Director of Technology & Operations Toto Prasetio said that along with the rapid digitalization in the banking sector, cybersecurity is also a challenge. In the future, cyber attacks will become a separate force majeure in banking.

Plus, there are many frauds or social engineering that are carried out by tricking banking customers.

BNI has announced an IT capex of around 3 percent of their gross income or revenue in 2022.

"Banks will also extend capex and opex [operational expenditure] which increase with this cyber attack. This is because solving cyber attack cases is not an easy thing. This incident is related to data, applications and others," said Toto in a talk show titled Challenges of Accelerating Digital Transformation for Indonesia's Economic Growth on Wednesday (26/7/2023) in Jakarta.

Meanwhile, a number of banks have indeed budgeted and even increased their IT capex this year. PT Bank Syariah Indonesia Tbk. (BRIS) or BSI, for example, has increased IT capex after indications of cyber ransomware attacks.

BSI was indeed hit by news of allegations of leaking customer data by the LockBit ransomware group on the dark web site. The total data leaked reached 1.5 terra bytes which included data on BSI customers and employees.

Deputy Minister of BUMN II Kartika Wirjoatmodjo said that in the case of cyber attacks that hit BSI, the government as a shareholder requested that the Islamic bank improve. Efforts to improve this include increasing IT capex.

"We will recalculate because yesterday's incident investigated what the deficiencies were. Later I will ask to recalculate how much additional security investment is needed," said Tiko, his nickname.

On the other hand, PT Bank Maybank Indonesia Tbk. (BNII) has also allocated capex for IT needs including cyber security of up to IDR 2 trillion.

President Director of Maybank Indonesia Taswin Zakaria said that Maybank Indonesia has allocated the IT capex since 2021. The use of the funds is within a period of three years or until 2024.

Meanwhile, the realization of Maybank's IT capex until the beginning of this year has reached 60 to 70 percent. Its utilization is for the modernization of IT devices to cyber security.

"IT capex ranges from IDR 1 trillion to IDR 2 trillion," said Taswin in a public expose on Tuesday (23/5/2023) in Jakarta.

Meanwhile, PT Bank Danamon Indonesia Tbk. (BDMN) is also preparing IT capex funds worth US$100 to US$115 million, or around Rp.1.5 to Rp.1.7 billion this year. The funds are budgeted to support IT development which has been included in the business development plan in 2023.

Corporate Secretary of PT Bank Rakyat Indonesia (Persero) Tbk. (BBRI) Aestika Oryza Gunarto previously said that BRI annually budgets capex of IDR 7 trillion to IDR 8 trillion. Then, 57 percent of them are allocated specifically for IT capex.

This year alone, the company plans to develop IT infrastructure, create solutions, products and services that suit customer needs.

Previously, Chairman of the OJK Board of Commissioners Mahendra Siregar said that banks also need to allocate their profits for the implementation of increased risk management, including anticipating cyber attacks, rather than spreading big dividends.

"We observe that the dividend payout ratios of various banks appear to be too large which can limit the ability of banks to invest in supporting the much needed digital transformation and innovation," he explained in the agenda of the General Meeting of Members of Ikatan Bankir Indonesia.