American International Journal of Business Management (AIJBM).

American International Journal of Business Management (AIJBM)
ISSN- 2379-106X, www.aijbm.com Volume 08, Issue 03 (March - 2025), PP 59-85
*Corresponding Author: Tri Kurniawan Latif1
www.aijbm.com 69 | Page
Leveraging Digital Transformation to Overcome Competitive
Challenges for New Entrant: A Strategic Approach for MSME
Digital Bank (Study Case: Harapan Bank)
Tri Kurniawan Latif1
, Leo Aldianto2
1
School of Business and Management, Institute of Tehnology Bandung, Indonesia
2
School of Business and Management/ Institute of Tehnology Bandung, Indonesia)
*Corresponding Author: Tri Kurniawan Latif
ABSTRACT: This study explores Harapan Bank's digital transformation efforts, focusing on operational
inefficiencies, digital product limitations, and competitive challenges in Indonesia's evolving financial
landscape. As the banking sector adapts to technological advances, traditional institutions like Harapan Bank
face growing pressure from agile fintech competitors and customer demands for seamless digital services. The
research identifies core constraints limiting Harapan Bank’s digital growth, particularly outdated processes
and limited product innovation, affecting its appeal to the MSME market. Using a mixed-methods approach,
qualitative data from leadership interviews and quantitative surveys of MSME respondents, the research
identifies operational inefficiencies and limited digital product innovation as key barriers to competitiveness.
The Technology Acceptance Model (TAM) provides a theoretical framework for analyzing MSME technology
adoption behavior, revealing that Perceived Usefulness manifests primarily through transactional efficiency
and business intelligence capabilities, while Perceived Ease of Use is evaluated predominantly through
onboarding experiences rather than interface design. The findings extend TAM by demonstrating how backend
operational capabilities directly influence frontend adoption decisions, bridging individual psychology with
organizational capabilities. The research identifies that MSMEs prioritize easy account opening, transaction
speed, and financial education tools, with mobile banking being the dominant channel. Based on MIT's Digital
Transformation framework, the study recommends a strategically phased transformation approach including
end-to-end automation, infrastructure modernization, AI-powered personalized services, hybrid service models,
and cultural transformation. These recommendations provide Harapan Bank with actionable strategies to
enhance operational efficiency and digital product innovation in its journey to become a leading digital bank
for the MSME sector.
KEYWORDS Digital Transformation, Technology Acceptance Model, Digital Bank, MSMEs, MIT's Five
Building Blocks
I. Introduction
In today's rapidly evolving financial landscape, digital transformation has become imperative for banks
seeking to remain competitive, particularly those targeting the Micro, Small, and Medium Enterprises (MSME)
sector. Digital transformation for businesses involves updating organizational culture and incorporating digital
technology and communication tools, ultimately fostering growth and creating more robust organizational
ecosystems (Ajayi-Nifise et al., 2024). The banking industry faces unprecedented challenges from the rise of
fintech companies, big tech entrants, and non-traditional players offering financial services, intensifying
competition in the digital financial sector (Osei et al., 2023; Ben-Zvi & Luftman, 2022). These agile competitors
pose a significant threat to traditional banking institutions by providing more flexible and diverse services, while
the COVID-19 pandemic has accelerated the shift toward digital banking, permanently altering consumer
behavior and expectations (Kudyba & Kudyba, 2020).
Harapan Bank, a national private bank established in 1993, has traversed a complex journey, adapting
over time to meet evolving customer demands. Resilient in the face of challenges, particularly during the 1997–
1998 monetary crisis, Harapan Bank has progressively aligned itself with Indonesia's growing digital economy.
In 2022, the bank took a significant step by becoming part of a major banking group, setting the stage for a
renewed strategic focus on providing comprehensive digital financial solutions. This shift, formalized through a
rebranding in 2023, underscores Harapan Bank’s commitment to supporting MSMEs by delivering tailored
digital services and fostering partnerships with the startup ecosystem. With this expanded focus, Harapan Bank
aims to empower MSMEs across Indonesia, helping them thrive sustainably within the country’s dynamic
financial landscape.
Despite this shift, Harapan Bank faces significant obstacles in scaling its customer base and achieving
sustainable growth. It struggles against competitors such as Bank Raya, Bank Ina Digital, Bank Jago, Jenius,
and Neo Bank, as evidenced by a comparatively smaller customer base, resulting in constrained revenue and
limited growth potential. Additionally, Harapan Bank’s slower pace in digital lending hampers its attractiveness

Leveraging Digital Transformation to Overcome Competitive Challenges for New Entrant…
to MSMEs seeking flexible and rapid digital loan options, leading to diminished customer loyalty and revenue
growth. These challenges in customer acquisition and digital lending not only impact profitability but also limit
the bank's ability to reinvest in advanced technology, a critical element for sustaining competitive advantage in
the digital era (Chawla, 2024).
Further analysis reveals that Harapan Bank’s digital innovation strategies are hindered by operational
inefficiencies, weak digital product offerings, and limited agility in adapting to market demands. Key challenges
include suboptimal marketing strategies, underdeveloped customer service models, and an overall lack of
innovation in digital products. To delve deeper into the prioritization of these issues, a preliminary survey was
conducted among team members involved in the transformation project, and the results were subsequently
analyzed using the Pareto method. This prioritization process enables a focused approach, underscoring that
addressing the top issues, operational inefficiencies and digital product limitations, can have a substantial impact
on Harapan Bank’s competitive position.
These challenges are particularly pronounced for traditional banks undertaking digital transformation
initiatives, where legacy systems and established operational procedures can impede innovation and agility.
Market research and organizational assessments frequently highlight operational inefficiencies and limitations in
digital product innovation as primary barriers to successful competition in the evolving digital banking
ecosystem.
Based on these identified challenges, this study aims to address the following research questions:
1. How does the impact of operational inefficiencies and digital product innovation limitations affect
Harapan Bank's profitability?
2. What are the key challenges faced by Harapan Bank in improving its digital product offerings and
operational efficiency?
3. How can Harapan Bank develop strategies to improve operational efficiency and enhance their digital
product offerings?
This research aims to explore the core factors limiting Harapan Bank’s digital growth and market
competitiveness, focusing on the bank's operational inefficiencies and digital product limitations. By
understanding these constraints, the study seeks to offer strategies to enhance Harapan Bank’s digital product
portfolio and operational capabilities. The research questions target the relationship between operational and
product innovation constraints and profitability, key challenges in digital product improvement, and potential
strategies for operational efficiency and product expansion. Ultimately, this study contributes actionable insights
to strengthen Harapan Bank's digital banking transformation, aiming to better position it within Indonesia’s
competitive financial landscape.
II. Literature Review
1.1 Digital Transformation Theory
Digital Transformation Theory conceptualizes how organizations strategically integrate digital
technologies to fundamentally alter their processes, business models, and stakeholder interactions, emphasizing
that true transformation transcends mere technology adoption to encompass comprehensive shifts in
organizational culture, strategy, and operations (Tratkowska, 2020; Ordieres-Meré et al., 2020). In the banking
sector specifically, digital transformation represents the extensive integration of digital technologies that
fundamentally reshape how financial institutions function and deliver value, driving strategic renewal and
cultural change while enhancing customer experiences, optimizing operations, and developing innovative
business models that disrupt traditional banking practices (De Borba, 2022; Putritamara et al., 2023; Nguyen-
Thi-Huong et al., 2023). The success of digital transformation in banking depends on multiple interdependent
factors: robust technology infrastructure supporting cloud computing, artificial intelligence, and big data
analytics that enable process automation and enhanced cybersecurity (Lafioune et al., 2023; Vlist et al., 2024);
human resource capabilities and digital skill development (Murugesan et al., 2023; Gul et al., 2024); committed
management support providing clear vision and leadership (Mazayo et al., 2023; Rodrigues et al., 2023); and
supportive government regulations establishing frameworks for data security, consumer protection, and financial
technology innovation (Jameaba, 2024; Hrytsai, 2023).
The functional architecture of digital transformation comprises three interconnected elements that
collectively reshape banking operations: Digital Operation, which enhances efficiency through process
automation, workflow streamlining, and resource optimization via transaction processing systems and
operational analytics that improve accuracy and reduce costs (Masoud & Basahel, 2023); Digital Experience,
which focuses on creating personalized customer interactions through intuitive user interfaces and service
enhancements, exemplified by mobile banking applications offering convenient access and secure services
(Lohano et al., 2024; Le et al., 2023; Minh Duc, 2022); and Digital Innovation, which drives continuous product
and service development through technologies like blockchain and big data analytics to create novel financial
offerings and business models (Varalakshmi & Katta, 2024; Santiago et al., 2024; Florea et al., 2024). Building

upon these foundations, the more specialized Digital Technology Transformation (DTT) framework (Haenlein
et al., 2019) emphasizes deep technology integration into banking operations, focusing on strategic
technological advancements like artificial intelligence and cloud computing that deliver tangible improvements
in service delivery and customer satisfaction (Vives, 2019; Brodsky & Oakes, 2017). The alignment of strategic,
structural, and process-oriented changes under DTT ensures that financial institutions effectively leverage these
innovations to drive sustainable growth and maintain competitiveness in an increasingly digital-centric
landscape characterized by rapidly evolving customer expectations and emerging competitive threats (Nadkarni
& Prügl, 2021; Ferreira et al., 2021).
1.2 Technology Acceptance Model (TAM)
The Technology Acceptance Model (TAM), introduced by Davis (1989), stands as a cornerstone
framework for explaining and predicting technology adoption behaviors across various contexts, including
digital banking services. At its core, TAM identifies two primary determinants of user acceptance: Perceived
Usefulness (PU), which refers to the degree to which individuals believe a system will enhance their
performance, and Perceived Ease of Use (PEOU), which reflects users' expectations that system interaction will
be relatively effortless (Gefen & Straub, 2000; Venkatesh & Davis, 1996). These constructs directly influence
users' attitudes toward technology, with PU consistently demonstrating stronger predictive power for adoption
intentions across numerous empirical studies. Research by Teo & Schaik (2009) demonstrated that systems
perceived as easier to use are also generally perceived as more useful, creating a reinforcing relationship
between these variables. In digital banking specifically, PU manifests when customers perceive concrete
benefits in managing finances more efficiently, while PEOU becomes evident when interfaces are intuitive
enough to minimize learning barriers for diverse user groups (Bansah & Agyei, 2022; Davis, 1989).
TAM has evolved significantly since its introduction, with extensions like TAM2 incorporating
external variables such as social influence and cognitive assessment processes to provide more comprehensive
explanatory power (Venkatesh & Davis, 2000). Longitudinal studies demonstrate that these extended models
account for 40-60% of variance in perceived usefulness and 34-52% of usage intentions, validating their
robustness in predicting technology adoption behaviors. Despite criticisms that TAM may oversimplify complex
human-technology interactions by overlooking broader social and cultural contexts (Legris et al., 2003), the
model's flexibility has enabled its application across diverse sectors including healthcare, education, and
financial services. Contemporary TAM applications integrate resource-related factors such as perceived costs
and self-efficacy (Sun et al., 2009), personality traits, and motivational factors (Zarmpou et al., 2012),
increasing its relevance for mobile banking and financial technology contexts where trust, security concerns,
and transactional confidence significantly impact adoption decisions. When applied to digital banking
transformation initiatives, TAM provides essential guidance for designing interfaces, communication strategies,
and customer onboarding processes that emphasize both functionality and accessibility, ultimately increasing the
likelihood of successful technology implementation and customer adoption (Shroff et al., 2011; Castañeda et al.,
2007).
1.3 Conceptual Framework
The components for enhancing digital transformation in banking are adapted from MIT's Five Building
Blocks of Digital Transformation framework (Ross et al., 2019) (Figure 1), which has been modified and
contextualized specifically for the financial services sector. This comprehensive approach incorporates four
essential components that work synergistically: the Operational Backbone, which provides the technological
foundation through robust IT infrastructure encompassing cloud computing, microservices architecture, and
advanced security systems to support high-volume transactions and third-party integration (Kumar et al., 2020;
Chen et al., 2019); Shared Customer Insights, which enables data-driven decision-making by analyzing
transaction patterns and preferences to develop detailed customer profiles (Komulainen & Saraniemi, 2020; Lee
& Shin, 2021); the Digital Platform, which facilitates ecosystem development through cloud-native architectures
with API gateways and containerization technologies (Ross et al., 2021; Weill & Woerner, 2021); and the
Accountability Framework, which ensures effective governance through interrelated elements of culture,
leadership, and strategic execution to foster innovation while maintaining risk awareness (Sebastian et al., 2021;
Kumar et al., 2020).

Figure 1. Conceptual Framework
This integrated approach enables financial institutions to navigate the complexities of digital
transformation while achieving multiple strategic objectives simultaneously (Sebastian et al., 2020). By
strengthening the operational backbone, banks can achieve greater efficiency and scalability in their core
processes (Fitzgerald et al., 2021), while robust customer insights drive personalized experiences that enhance
loyalty and engagement (Mention, 2021; Boot et al., 2022). The digital platform component facilitates
innovation through ecosystem partnerships and rapid service deployment (Zachariadis & Ozcan, 2021; Gomber
et al., 2021), while the accountability framework ensures that transformation initiatives remain aligned with
strategic goals and regulatory requirements (Alt & Puschmann, 2022; Chen et al., 2020). Through the balanced
implementation of these four components, banks can maintain operational resilience, enhance customer
experience, foster continuous innovation, and ensure sustainable growth in an increasingly competitive digital
banking landscape where traditional boundaries between financial services providers continue to blur
(Venkateswaran & Rangarajan, 2021).
External Developer Platform’ was removed from the framework to streamline Harapan Bank's focus on
building strong internal capabilities and addressing MSME-specific needs. Engaging with external partners adds
complexity and resource demands, which may dilute the bank's focus on developing unique, customer-centric
solutions. By concentrating on internal innovation, the bank can allocate resources efficiently, differentiate itself
from competitors, and ensure scalability. External collaborations can be considered in future phases once the
foundational systems and processes are firmly established.
III. Methodology
1.4 Research Design
This study employs a mixed-method approach, combining both qualitative and quantitative methods to
ensure a comprehensive understanding of Harapan Bank's strategic position in the digital banking landscape.
This methodological triangulation strengthens the research validity (Creswell, 2014) by capturing both the
nuanced internal perspectives of Harapan Bank's leadership and the broader market expectations of the MSME
sector. The research design offers a methodical approach to comprehending and resolving the challenges
encountered by Harapan Bank during its transition to digital transformation, particularly as it positions itself as a
new entrant in the MSME digital banking market. Following established methodological principles (Bryman,
2016; Saunders et al., 2019), the study begins by identifying specific research problems, needs, and objectives
that create a structured framework for investigation. This foundational phase guarantees that the research
concentrates on critical issues, including operational inefficiencies and limitations in digital product innovation,
thereby aligning the research objectives with Harapan Bank's fundamental organizational goals and strategic
priorities in the evolving digital banking ecosystem.
The mixed-methods data collection strategy incorporates qualitative elements through semi-structured
interviews with Harapan Bank's senior executives and document analysis of strategic plans, while quantitative
data is gathered through comprehensive surveys of MSME actors who represent potential customers. Data
analysis employs both thematic analysis techniques for qualitative data, identifying patterns and insights related
to Harapan Bank's transformation journey, and descriptive statistical analysis for quantitative data to reveal
market trends and preferences. The research design is further guided by theoretical frameworks including
SWOT analysis to assess Harapan Bank's competitive position as a digital challenger bank, the Technology
Acceptance Model to understand MSME adoption of digital banking services, and Digital Transformation
Theory as an interpretive lens for Harapan Bank's strategic initiatives. This comprehensive methodological
approach ensures that the resulting recommendations for enhancing operational efficiency and digital product

innovation are both theoretically grounded and practically applicable within Harapan Bank's specific context as
it seeks to establish a competitive foothold in the MSME digital banking segment.
1.5 Data Collection
This research utilizes both primary and secondary data. Primary data is collected through interviews
with key informants and surveys distributed to MSMEs that are not customers of Harapan Bank. The interviews
provide in-depth insights into the internal challenges and strategic priorities of Harapan Bank's digital
transformation journey, while the surveys offer quantitative insights into the broader market's perceptions and
expectations of digital banking services. Meanwhile, secondary data is sourced from internal company records,
annual reports, government reports, and reputable institutions, offering background information and historical
context.
Qualitative Data Collection
Harapan Bank's qualitative data collection strategy focuses on gaining in-depth understanding of
internal challenges and strategic priorities in digital transformation across multiple aspects: First, gathering
customer insights about digital banking adoption barriers (Davis, 2017), customer satisfaction and engagement
(Johnson & Lee, 2020), and comparing technological performance with competitors (Smith et al., 2019);
Second, analyzing operational performance from human resources and process perspectives, including impacts
on service delivery and efficiency, and benchmarking against industry best practices (Brown & Taylor, 2022;
Clark et al., 2020); Third, evaluating accountability by addressing challenges in digital product development
(Chen & Liu, 2019), resource allocation (Kim & Park, 2022), and cross-functional collaboration (Sharma,
2021); Fourth, assessing the operational backbone by focusing on IT infrastructure, operational strategy, HR
contribution, and organizational structure (Patel & Desai, 2018; Wang & Chen, 2019); and Fifth, developing the
digital platform by establishing evaluation criteria for digital product solutions (Gupta & Sharma, 2020),
determining development factors, comparing proposed solutions, and identifying trade-offs in digital product
improvement priorities (Patel & Johnson, 2022).
Quantitative Data Collection
The quantitative data collection strategy involved surveying MSMEs who are not current Harapan
Bank customers, gathering insights across four key areas: Operational Backbone, focusing on IT infrastructure
usage patterns and navigation ease based on Davis's (1989) Technology Acceptance Model (TAM) framework
of Perceived Usefulness (PU) and Perceived Ease of Use (PEOU); Shared Customer Insights, capturing
demographic information and financial service usage behaviors through self-created questions to profile MSME
players; Accountability Framework, measuring satisfaction with customer support and preferences based on
Venkatesh et al.'s (2003) user acceptance model; and Digital Platform assessment, examining feature utility
through Bagozzi's (2007) TAM and consumer adoption framework, security concerns using Kim et al.'s (2008)
Trust in Digital Transactions model, and identifying difficulties with digital financial products and desired new
services, incorporating Davis's (1989) Behavioral Intention to Use (BI) concept to understand adoption
likelihood among potential MSME customers.
1.6 Population and Sample
The selection of research informants in this study follows a purposive sampling approach designed to
capture comprehensive insights into Harapan Bank's digital transformation journey. For the qualitative
component, key leadership positions were strategically selected based on specific expertise criteria. These senior
executives were selected because they collectively provide multifaceted perspectives on Harapan Bank's
strategic objectives, technological implementation challenges, operational integration of digital processes, and
customer-centric product development as the bank positions itself as a new entrant in the MSME digital banking
market.
Table 1. Criteria for Selecting Research Informants
Position Role Expected Insights
Chief Analytics
Officer
The top leader responsible for overall
business & marketing strategy.
Strategic insights on Harapan Bank long-term
direction and the role of digital transformation
in strengthening the bank's competitive
advantage and digitalization in marketing
strategy.
Chief Technology
Officer
Leads technology strategy,
implementation of new technologies,
and IT security.
Technical and strategic information on the
digital technologies being implemented,
implementation challenges, and potential
technological innovations at Harapan Bank.
Chief Digital
Operational
Directs digital transformation
initiatives and integrates
digitalization throughout the bank's
operations.
Comprehensive views on the planning and
execution of digital transformation, as well as
ongoing digital initiatives to meet customer
needs.

Position Role Expected Insights
Chief Product Digital
Directs digital product development
& innovation, managing customer
experiance and digital
transformation.
Information on digital product, technology and
how digital innovations support customer
experience and build loyalty.
For the quantitative component, a systematic sampling approach was implemented to survey 200
MSME participants who are not current Harapan Bank customers, representing potential future clients for the
bank. This sample was carefully constructed to ensure representative diversity across business sizes (micro:
40%, small: 35%, medium: 25%), industry sectors (retail, services, manufacturing, agriculture), operational
longevity (startups to established businesses), and geographical distribution (urban, suburban, and rural areas).
Participants were screened to ensure they had operational decision-making authority within their businesses and
some experience with financial services, making their perspectives particularly valuable for understanding
market expectations. This methodically selected sample provides statistically significant insights into the
broader MSME market's perceptions of digital banking services, their unmet financial needs, technology
adoption readiness, and expectations regarding digital banking features—critical intelligence as Harapan Bank
develops its competitive strategy in the MSME digital banking segment.
IV. Result and Discussion
4.1 SWOT Analysis
The SWOT analysis of Harapan Bank reveals a financial institution in digital transition, balancing
significant strengths in digital-focused strategy, customer-centric innovation, agile methodologies, cloud
migration, and automation initiatives against persistent weaknesses including outdated legacy systems, cultural
resistance from traditional banking employees, operational inefficiencies, and historically rigid product
offerings; meanwhile, the bank can capitalize on substantial opportunities in the underserved rural MSME
market, product innovation with customized solutions, hybrid digital-physical expansion models, AI integration
for personalized services, and sector-specific product development, while navigating threats from digital-first
competitors, regulatory hurdles, security vulnerabilities, resource constraints, and the complex blending of
traditional and digital banking cultures during this transformational period.
Table 1. SWOT Analysis
Strengths Weaknesses
• Digital Transformation Focus: Strategic shift to
become more digitally-focused, positioning the bank to
meet evolving MSME demands.
• Legacy Systems: Outdated infrastructure (100%
couldn't support digital transformation roadmap)
hindering innovation and scalability.
• Customer-Centric Innovation: Development
approach starts with identifying target customers and
prioritizing customer-focused product innovation.
• Cultural Resistance: Challenges in transitioning
from traditional banking culture to digital-first
mindset among conventional banking employees.
• Agile Methodology: Implementation of agile
methodologies for quick feature addition and flexible
response to changing market needs.
• Operational Inefficiencies: Semi-automatic
processes and manual verifications slowing down
operations (e.g., account opening).
• Cloud Migration & IT Upgrades: Migration to cloud
technologies (Google Workspace) and VPN access
improving operational efficiency.
• Rigid Products: Previous inflexible offerings (e.g.,
rigid loan terms) poorly aligned with diverse MSME
needs.
• Automation Strategy: Focus on automating front and
back-end operations to enhance efficiency and reduce
human error.
Opportunities Threats
• Targeting MSME Market: Substantial growth
potential in underserved rural areas for high-end
products.
• Intense Competition: Digital-first banks (e.g.,
Bank Raya) and fintech companies with established
digital models.
• Product Innovation for MSMEs: Developing tailored
solutions like customized repayment schedules for
MSME loans.
• Regulatory Hurdles: Compliance requirements
and permit processes slowing transformation efforts.
• Expansion via Hybrid Models: Combining digital
tools with physical touchpoints to reach areas with
limited digital access.
• Security Risks: Vulnerabilities from outdated
systems (e.g., Windows 7) and lack of adequate
protection.
• AI Integration: Leveraging AI for loan profiling to
offer personalized services and improve customer
• Technological & Resources Constraints: Limited
resources requiring outsourcing to address workload

experience. spikes.
• Sector-Specific Product Development: Creating
specialized products for specific sectors (e.g., food and
beverage MSMEs).
• Culture Shifts: Challenges in blending old and
new cultures, requiring workforce reskilling.
Qualitative Analysis
The qualitative analysis conducted in this research employed thematic analysis to identify key themes
from interviews with Harapan Bank's leadership. Thematic analysis revealed critical insights into the
perspectives of various departments within the bank, highlighting challenges and strategic priorities related to
digital transformation.
The Chief of Products emphasized the importance of balancing operational efficiency with innovation,
describing it as essential for the bank's business transformation. Drawing a parallel to Apple's evolution under
Steve Jobs, the Chief noted the challenge of maintaining innovation while streamlining operations. Moreover,
they stressed the need for customer-centric product innovation, referencing Amazon's approach. The Chief also
pointed out the necessity of identifying and segmenting the MSME market, which includes 7-8 million potential
customers, and advocated for small-scale launches and testing to mitigate risks.
The Chief of Business Development painted a picture of Harapan Bank transitioning from a "conventional
bank with limited digital channels" to embracing a more digital approach. The focus had historically been
on "ABC's ecosystem," limiting the bank’s market expansion. The Chief identified "rigid loan terms" as a barrier
to offering flexible solutions for MSME customers and emphasized the challenge of "changing the culture of
conventional banking employees." Additionally, the Chief highlighted the need for "flexible platforms" and
a "hybrid model" combining digital and physical touchpoints, stressing that offerings should be customized
based on community and regional needs.
From the perspective of the Chief of Operations, the thematic analysis revealed that the bank’s reliance
on "semi-automatic processes" caused delays in account opening and credit processing. They also noted
that "manual verification processes" slowed down service delivery and that "outdated systems" hindered the
scaling of digital products. The Chief advocated for "end-to-end digital transformation" to automate both front
and back-end operations. Furthermore, they emphasized the challenge of blending old and new cultures,
recommending that the bank hire a mix of people from fintech and conventional banking to bring diverse
perspectives.
The Chief of IT shared insights regarding the infrastructure's inability to support the digital
transformation roadmap, noting that "100% of the infrastructure couldn't support" the new initiatives. They
identified severe "IT security gaps,"including outdated systems and insufficient protection, and
introduced "cloud migration" to improve collaboration. The Chief also adopted "agile methodology" for
developing new features quickly, faced resource management challenges, and addressed cultural resistance,
especially with "existing staff feeling threatened by new hires." The Chief emphasized the importance
of teamwork, avoiding "finger-pointing" to resolve challenges collaboratively. A word count analysis (Table 3)
of the interviews showed that operational backbone issues were the most frequently discussed, followed
by accountability framework, shared customer insights, and digital platforms.
Theme Codes Counts
Operational
Backbone
Efficiency, automation, and operational optimizatio, operational Inefficiency,
Manual Processes, Legacy Systems, Infrastructure Challenges, IT Security
Gaps, Infrastructure Limitations, Stepwise Infrastructure Upgrade, Hybrid
Model Complexity
25
Accountability
Framework
Cultural Adaptation Challenges, Regulatory Challenges, Resource
Management, Cultural Resistance, Employee Training and Development,
Collaboration, Workforce Strategy, Leadership, Governance, and Strategy
15
Shared Customer
Insights
Product Customization Challenges, Customization Strategy, Customer
Identification, MSME Targeting & Segmentation, Digital Product Support,
Outreach and Education, Customer needs, feedback, personalization
12
Digital Platform Platform development, Competition, Innovation, Product, Digital Solutions
Integration, Cloud Migration, Cloud Adoption, AI Integration, Super App
Strategy, Agile Development, End-to-End Automation, Automation Strategy,
Internal Process Automation.
12
4.2 Quantitative Result
The quantitative analysis of Harapan Bank’s digital transformation provides valuable insights into the
demographic characteristics of MSME participants who are not current customers. The survey reveals a youthful
group of MSME owners, particularly between ages 26-35, with a balanced gender distribution and most
respondents having a high school or bachelor’s education. These demographics indicate a trend of younger

entrepreneurs driving the MSME sector, many in the startup phase with businesses under three years old,
suggesting a modern, tech-savvy profile that favors digital-friendly solutions. This group’s background signals
an opportunity for Harapan Bank to align digital services with the needs of early-stage, individually-owned
ventures.
Regarding financial services usage, Fig.5 shows that nearly half of the respondents engage in banking
transactions over 20 times per month, underscoring the role of banking in supporting day-to-day business
operations, especially for cash flow management. With 75.9% of MSMEs primarily using mobile banking
(Fig.5), there is a strong preference for accessible, digital banking platforms. This high adoption rate of mobile
services highlights the demand for digital solutions that enable efficient transactions, positioning Harapan Bank
to focus on mobile banking innovations that meet these digital expectations.
Fig.5 Usage Frequency (a) and Preferred E-Channel Banking Services (b) for MSMEs
In the area of loan and credit experience, over 60% of MSMEs have applied for loans, with Micro Loans (KUR)
favored by more than 45% of respondents, reflecting their relevance to small enterprises (Fig.6). Despite this
usage, challenges persist, with high interest rates cited by 38.36% of respondents as a major barrier, followed by
long approval processes at 31.05% (Fig.6). These obstacles highlight opportunities for Harapan Bank to
streamline loan processes and offer more accessible, affordable credit solutions tailored to MSMEs’ specific
needs.
Fig.6 Beneficial Loan Products (a) and Challenges for MSMEs (b)
MSMEs also face significant challenges in using banking services, especially regarding operational
inefficiencies and costs. High administrative and transaction fees were mentioned by 47% of respondents, while
24% cited slow transaction processing times, both of which impact over 70% of participants and complicate
business operations. Security remains a concern, with 38% of respondents worried about transaction security
and 33% about data misuse. Addressing these issues through streamlined processes, lower fees, and enhanced
security could greatly enhance MSME satisfaction with Harapan Bank’s services.
Customer support preferences, as depicted in Fig.7, reveal that MSMEs increasingly favor digital-first
support solutions, with over 50% of respondents preferring assistance via mobile banking apps, including live
chat and in-app help features. This shift towards mobile-based support emphasizes the need for Harapan Bank to
invest in accessible and efficient customer service channels that align with the expectations of MSMEs, ensuring
they receive prompt and reliable assistance in managing their banking needs.
a b
b
a

Fig.7 Preferred Customer Support Channels
Additionally, e-wallets are gaining traction among MSMEs, with platforms like Gopay and DANA widely used
by respondents. Fig.8 indicates that 40% of respondents rely on e-wallets over 20 times per month, showcasing
their role in facilitating business transactions. Despite transaction fees and network stability issues cited as
primary challenges, the popularity of e-wallets reflects MSMEs’ preference for convenient digital solutions.
Features like paylater options further appeal to MSMEs, who benefit from quick approvals and flexible payment
terms, underscoring the potential of e-wallets as a key financial tool.
Fig.8 Preferred E-Wallet Platforms Among Respondents
Looking toward future expectations, MSMEs prioritize ease of account opening, with 43% highlighting
this as essential, followed by simpler loan requirements and competitive interest rates. Many respondents also
seek additional features like transaction receipts and financial reporting tools in mobile banking, while 63%
express interest in platforms offering financial education. Addressing these expectations could help Harapan
Bank position itself as not only a service provider but a partner supporting MSME growth, by meeting their
needs for accessible, affordable, and informative banking solutions in the evolving digital landscape.
4.3 Business Analysis
The Business Analysis section examines Harapan Bank's digital transformation strategy through the
lens of four interconnected dimensions derived from the conceptual framework: Operational Backbone, which
evaluates the bank's IT infrastructure, people, operations, and strategy against MSME expectations for efficient
processing; Accountability Framework, which addresses organizational culture, governance mechanisms, and
change management approaches needed to overcome the "cultural resistance" identified by leadership; Shared
Customer Insights, which analyzes how effectively the bank leverages demographic data and usage patterns of
its youthful, digitally-active potential customer base to inform product development; and Digital Platform,
which assesses the bank's current digital offerings, competitive positioning against alternatives like e-wallets,
and innovation roadmap for meeting the specific needs expressed by MSMEs, such as cash flow management
tools and simplified loan processes.
Operational Backbone
Harapan Bank has found that depending on manual procedures for things such credit processing and
account opening has caused delays, therefore affecting customer satisfaction and profitability. Focussing on

automating front-end and back-end activities, the bank intends to use end-to- end digital transformation to do
this. Robotic Process Automation (RPA) for data-intensive operations—such as account opening and loan
processing—then followed by the incorporation of AI for decision-making in loan approvals and fraud detection
would help to lower manual involvement and increase operational efficiency. Establishing a firm basis for
operational excellence, this all-encompassing automation approach seeks to simplify procedures, increase
customer service via self-service technology, and enhance the whole customer experience.
Harapan Bank's antiquated infrastructure, particularly in rural regions, hampers its capacity to assist
digital transformation. Particularly for customer-facing services, the bank understands the need of major
changes allowing digital operations. Important improvements like server upgrades and cloud migration will help
to ensure scalable and safe operations. For instance, the transition to Google Workspace has already enhanced
collaboration and diminished dependence on antiquated systems. Harapan Bank will be able to more effectively
serve and reach MSMEs, particularly in rural markets, by expanding this approach. This will also improve
service delivery and facilitate development.
Shared Customer Insights
Harapan Bank has substantial client retention difficulties stemming from ineffective procedures and
restricted product offers. By designing for the predominant youthful MSME demographic (ages 26-35) with
mobile-first preferences (75.9% primarily use mobile banking), Harapan Bank directly addresses PEOU through
familiar interfaces and interaction patterns. The bank should give the digital experience top priority in order to
solve this, concentrating especially on user experience (UX) design for e-channel platforms. With features like
one-click loan applications, automatic transaction receipts, and customisable dashboards to streamline financial
management for MSMEs, the platform should employ mobile-first concepts given the great acceptance of
mobile banking among MSMEs. Furthermore included should be AI-driven technologies to provide tailored
financial services, like dynamic repayment schedules and customised loan packages, which better fit the
particular requirements of MSMEs and improve customer relationships and lower turnover.
By implementing transparent fee structures and enhanced security education, Harapan Bank addresses
these adoption barriers while creating simplified account opening processes (priority for 43% of respondents),
directly improving the onboarding experience that our research identified as a primary PEOU determinant rather
than ongoing interface design – a theoretical contribution to TAM's application in business banking contexts.
Key issues for MSMEs include data security (38%), hence the bank has to combine strong security
elements such data encryption, multi-factor authentication, and artificial intelligence-based fraud detection to
guard private financial data. Open disclosure on these security policies will assist to increase confidence and
support the bank's reputation. By including live chat and AI-driven chatbots in the mobile app to provide on-
demand help, the bank should also enhance customer happiness by guaranteeing fast replies to regular banking
enquiries and thereby enhancing client service.
Harapan Bank should implement a hybrid service model that integrates both digital and physical
touchpoints in order to more effectively serve MSMEs, particularly those located in rural areas. This model
caters to the distinct requirements of MSMEs in various regions by guaranteeing customer engagement and
flexibility. While more than half of the respondents choose mobile banking, keeping physical branches where
digital infrastructure may be inadequate would enable the bank to serve a larger clientele. Furthermore, the
findings of the MSME survey show that the bank has to modify its approach to fit the particular demands of its
present clients as well as the general market expectations. This method will guarantee that Harapan Bank's
services are tailored to the changing requirements of its customers.
Digital Platform
Increasing the Speed of Digital Product Innovation for Micro, Small, and Medium-Sized Enterprise
Harapan Bank is susceptible to fintech competition due to its constraints regarding digital product innovation.
The bank must expedite the development and launch of digital products that are specifically designed to meet
the requirements of MSME in order to maintain its competitive edge. The bank should prioritise the
enhancement of mobile banking features, as over 60% of MSMEs rely on it. The account opening process is
simplified, MSMEs are permitted to register as QRIS merchants, transaction processing speeds are enhanced,
and AI-powered customer support is developed through chatbots and live chat. These are among the key
strategies. By concentrating on a Minimum Viable Product (MVP) during the product development process, the
bank can guarantee that its offerings are in accordance with the requirements of its customers, particularly
SMEs.
Agile Methodology for Continuous Improvement: Harapan Bank should use agile approaches in
creating internal procedures as well as digital products considering its agility. This strategy will help the bank to
react fast to changes in the market, therefore enhancing operational effectiveness and service quality. Adopting
agile concepts would help the bank to remain sensitive to technical developments and consumer needs, therefore
guaranteeing ongoing development.

Harapan Bank should provide sector-specific banking solutions catered to certain market demands if it
is to effectively assist MSMEs. For example, MSMEs in the food and beverage industry encounter issues like
as seasonality and cash flow volatility, necessitating customised solutions like inventory finance or short-term
loans to address these concerns. Furthermore, Harapan Bank can more effectively address the requirements of
MSME by providing microloans with flexible term options and attractive interest rates, which in turn increases
engagement with loan products.
Accountability Framework
Addressing with Cultural Resistance to Digital change: Harapan Bank deals especially with workers
from traditional banking backgrounds, who represent major cultural resistance to digital change. The bank has to
make investments in personnel development and training initiatives that provide the required digital capabilities
if it is to meet this obstacle. Successful use of new technologies and procedures depends on encouraging a
digital first culture. Active encouragement of creativity and adaptation by leaders will help to guarantee that
staff members complement the digital objectives of the bank. Hiring a mix of fintech and conventional banking
personnel has, according to the Chief of Operations, helped provide different ideas to handle technical and risk-
related issues.
Harapan Bank should give change management strategies and training that facilitate the shift to new
digital technologies, like RPA and data analytics top priority if it is to enable thorough automation for
operational efficiency. This will enable staff members to properly run digital operations and foster an innovative
and always learning culture. Ensuring staff members are in line with digital goals helps the bank enhance
customer experience and service quality, thus smoothes out the transition process and increases its efficiency.
V. Conclusion
5.1 Conclusion
Improving operating efficiency, boosting product offers, and staying competitive in the fast changing
digital banking market all depend on Harapan Bank's digital revolution. The SWOT analysis and Technology
Acceptance Model (TAM) findings show the bank's shortcomings—operational inefficiencies, antiquated
infrastructure, and cultural opposition to change—as well as its strengths—focus on customer-centric innovation
and AI-driven solutions. Particularly in underprivileged rural areas where customised financial products like
low-interest microloans and flexible payback schedules may set the bank apart from rivals, the MSME sector
offers great development prospects.
Digital-first banks and fintech startups, however, provide fierce competition for the bank as well as
difficulties with data security and regulatory compliance. Harapan Bank has to quicken its digital
transformation, give security first priority including multi-factor authentication, and guarantee that its digital
offerings are practical and user-friendly if it is to remain competitive. The results from TAM underscore the
significance of intuitive, secure digital solutions to fulfil the demands of MSME clients.
By using MIT’s Five Building Blocks of Digital Transformation—emphasizing Operational Backbone
enhancements, Shared Customer Insights, a comprehensive Digital Platform, and a solid Accountability
Framework—Harapan Bank can address its issues and capitalise on its possibilities. This strategy methodology
will facilitate organisational alignment, improve operational efficiency, and promote sustained success in the
competitive digital banking sector.
5.2 Recommendation
To leverage recognised potential and confront its obstacles, Harapan Bank should concentrate on
various strategic initiatives. First, the bank has to speed up legacy system upgrading to guarantee its
infrastructure supports scalable digital solutions. Investment in cybersecurity and cloud migration will improve
operational effectiveness and equip the bank for expansion in years to come. In front-end as well as back-end
operations, the bank should give automation top priority in order to reduce human labour, enhance service
quality, and speed up processes.
Second, Harapan Bank should keep improving its product range, concentrating on sector-specific solutions for
MSMEs including loans catered to sectors like food and beverage. Combining AI-powered features for tailored
loan profiles and financial forecasts would increase the platform's apparent value even more, thereby increasing
interaction and use.
Thirdly, the user experience has to be improved absolutely. Harapan Bank should maximise its mobile-
first design to guarantee it is responsive, simple, and easy to use given the great acceptance of mobile banking
among MSMEs. Customer happiness and loyalty will be raised by features like real-time financial information
and one-click loan applications.
Fourth, developing confidence with MSMEs depends mostly on security. Advanced security solutions
such multi-factor authentication, data encryption, and AI-based fraud detection should be investments made by
the bank in order to safeguard client data and thereby reassure them. Open discussion of these security policies
will assist to overcome privacy issues and promote platform acceptance.

Harapan Bank is to contemplate a hybrid service model that integrates digital banking with physical
touchpoints, particularly in rural and underdeveloped regions where digital services are scarce. . Ensure that
MSMEs in these regions have access to digital banking services by expanding its reach through mobile agents or
local offices.
However, it's important to note that the quantitative data used in the analysis primarily reflects general
MSME needs, not the specific preferences of Harapan Bank’s current customers. Additionally, the data is
mostly from Java, so the bank should collect data from other regions, especially rural areas, to ensure that its
services meet the unique digital infrastructure and customer needs across all of Indonesia. This will enable
Harapan Bank to develop a more comprehensive strategy tailored to diverse regional needs.
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9092-x

APPENDIX A
Fishbone diagram illustrating business issues in Harapan Bank
APPENDIX B
The issues contributing to the Harapan Bank's weak competitive position
APPENDIX C
Qualitative Data Collection
Question Items Literature
Shared Customer Insights - Digital banking adoption barriers (Davis, 2017),

1.What are the main technological barriers in Harapan
Bank's current digital product offerings?
- Customer satisfaction and engagement in digital banking
(Johnson & Lee, 2020),
- User acceptance of digital banking functionalities
(Nguyen et al., 2018; Patel et al., 2021),
- Technological performance benchmarking in digital
banking (Smith et al., 2019)
2.How do these technological limitations impact
customer satisfaction and engagement?
3.Are there specific functionalities that customers find
lacking in our digital products?
4.What feedback have customers provided regarding
the technological aspects of our digital products?
5.How does the technological aspect of Harapan
Bank's digital product performance compare to that
of competitors?
People & Operations
- Operational performance in banking (Brown & Taylor,
2022),
- Impact of operational issues on service delivery (Clark et
al., 2020),
- Process improvement in banking (Wilson, 2019),
- Persistent operational challenges (Garcia & Hernandez,
2021),
- Benchmarking operational performance (Miller, 2018)
1. What are the primary areas where Harapan Bank's
operations are not meeting performance expectations
from a people and process perspective?
2. How have these operational issues impacted our
service delivery and efficiency?
3. What current processes or systems are in need of
improvement?
4. Are there any specific operational challenges that
have persisted despite previous efforts to address them?
5. How does the operational performance of Harapan
Bank compare with industry best practices or
benchmarks?
Accountability - Organizational challenges in digital product development
(Chen & Liu, 2019),
- Resource allocation for digital product development
(Kim & Park, 2022),
- Internal processes for digital innovation (Gupta et al.,
2020),
- Organizational structure and digital product development
(Russo & Singh, 2023),
- Cross-functional collaboration in digital banking
(Sharma, 2021)
1. What are the primary challenges customers face
when accessing digital financial services?
2. How can the bank improve the ease of use and
accessibility of its digital banking services?
3. What strategies can be implemented to enhance
customer satisfaction and engagement in digital
banking?
Operational Backbone
- Factors affecting operational improvement (Patel &
Desai, 2018),
- Operational process management (Nguyen & Tran,
2020),
- Operational efficiency challenges (Lee et al., 2022),
- Organizational structure and operational performance
(Wang & Chen, 2019),
- Strategies for addressing operational inefficiencies
(Kumar, 2021)
1. How does the current IT infrastructure support the
bank’s operational efficiency?
2. What are the main challenges in optimizing the
bank’s operational strategy?
3. How can human resources contribute to improving
operational efficiency and supporting digital
transformation?
4. How does Harapan Bank’s organizational structure
impact its ability to improve operational performance?

5. What strategies or initiatives have been implemented
internally to address operational inefficiencies, and
what were their outcomes?
Digital Platform
- Evaluation criteria for digital product solutions (Gupta &
Sharma, 2020),
- Ranking factors affecting digital product development
(Singh et al., 2019),
- Comparing digital product solutions (Kim et al., 2021),
- Trade-offs in digital product improvement prioritization
(Patel & Johnson, 2022)
1. What criteria should be used to evaluate and
prioritize potential solutions for addressing digital
product limitations?
2. How do you rank the importance of different factors
affecting digital product development (e.g., technology,
budget, expertise)?
3. How do different proposed solutions for digital
product limitations compare based on the selected
criteria?
4. What are the key trade-offs involved in prioritizing
digital product improvements?
APPENDIX B
Quantitative Data Collection
The quantitative data collection involved surveys distributed to MSMEs that are not current customers of
Harapan Bank, focusing on:
Focus Area Question Literature
Operational Backbone IT Infrastructure & Operations
How often do you use financial
management tools, such as expense
tracking or accounting, offered by your
digital banking platform?
Perceived usefulness (PU), Davis, F. D.
(1989), Technology Acceptance Model
(TAM).
What additional financial management
features would help your business? (e.g.,
invoicing, budgeting tools, financial
reports)
How easy is it to navigate your current
digital banking platform? (Scale 1-5)
Perceived Ease of Use (PEOU), Davis, F.
D. (1989), TAM
What improvements would you suggest
to make digital banking easier for you to
use?
Shared Customer
Insights
Demographic & Customer Behavior
Self-created: to capture and profile
UMKM players
What type of business do you operate?
(e.g., PT, CV, etc.)
How many employees work in your
business?
What is your business's annual revenue?
In which region or city is your business
located?
Do you currently use any banking
product/services?
Self-created: To capture the behavior of
customers in terms of financial services
How often do you use digital banking
platforms for your business transactions?
What type of devices do you use for
digital banking?
What challenges do you face when using
your current banking services?
Accountability
Framework
How satisfied are you with the customer
support offered by your digital banking
Perceived Ease of Use (PEOU),
Venkatesh, V., Morris, M. G., & Davis,

Focus Area Question Literature
provider? G. B. (2003), User acceptance.
What type of customer support would
you expect when using digital banking
services?
Do you prefer self-service options (e.g.,
FAQs, help articles) or direct customer
support?
How can digital banking providers better
support the growth of your business?
Digital Platform Current Digital Platform & Security Competitor/Alternative Products
What features do you find most useful in
a digital banking platform?
Perceived usefulness (PU), Bagozzi, R. P.
(2007), TAM and consumer adoption.
What concerns do you have regarding
security when using digital banking
platforms?
Security and Trust (Digital Banking
Aspect), Kim, D. J., Ferrin, D. L., & Rao,
H. R. (2008), Trust in Digital
Transactions
What difficulties have you faced when
applying for financial products (loans,
credit) through digital channels?
Self-created
What new digital banking products or
services would you like to see
introduced specifically for MSMEs?
Behavioral Intention to Use (BI), Davis,
F. D. (1989), TAM
*Corresponding Author: Tri Kurniawan Latif
1
(School of Business & Management/ Institute of Technology Bandung, Indonesia)

American International Journal of Business Management (AIJBM).

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