The pivot to digital-first banking


Posted at Oct 07 2020 05:14 PM | Updated as of Oct 07 2020 05:30 PM

As the Philippine market adapts to e-banking, digital payments, and contactless transactions, what are the areas for growth and improvement? 

This topic was brought up for discourse on the recent ANC Conversations interview with Backbase Regional Director Riddhi Dutta, Backbase Philippines Country Sales Manager Aileen Lopez-Sanchez, and BPI Chief Digital Officer Noel Santiago.

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Changes in banking brought by the health crisis

The new normal is a term thrown casually nowadays, but the circumstance have truly changed how people work, shop, and socialize. It is also changing how people do their banking transactions.

The Philippines is one of the countries with the longest quarantine and six months in, people are rapidly transitioning to digital. The Filipino's entrepreneurial spirit has shown itself. People are taking to social media to peddle home-baked goods or handicrafts. New markets are created and community-based commerce is taking center stage. As the current health situation continues, more and more are shifting to online services and digital transactions. Money is being exchanged online and Filipinos are recognizing the benefits and necessity of digital payments. 

The situation is continuously affecting customers' purchasing behavior, needs, and demands. It has also increased expectations for what traditional banks can offer. Now, availability, access, and control are important.

At a time where quarantine measures are observed with mandates to stay at home, banks need to be digital-ready to create an inclusive banking experience and continue safely serving its stakeholders. 

"Banks should look at the unbanked and underbanked segments of the market," said Backbase Philippines Country Sales Manager Aileen Lopez-Sanchez. "For these unbanked and underbanked individuals who do not have access to a physical branch or could not even go to a bank, digital banking could aid them in having access to the same services that they can get from a physical branch."

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The timely shift to digital 

It was back in 2016 when the Bank of the Philippine Islands (BPI) had the foresight to invest heavily in digital. All around the globe, more and more industries are shifting to online, yet in a country where unbanked adults are at 51.2 million out of a total adult population of 72 million in 2019, many are still hesitant to take this leap. 

Banks did not feel the urgency to prioritize digital transformations. 

BPI saw that their customer base was growing as their systems were becoming obsolete, so the company decided to take action and the outcome exceeded expectations. 

''From 800 million online transactions per year, we are now doing 1.6 billion. It is like more than double. We had a 2 million customer base in 2016, we are now 4.4 million customers. So, the growth that we are seeing is because the capacity that we have built, the digitalization capability that we have put, allowed us to support the demand that we were facing in 2016," said BPI Chief Digital Officer Noel Santiago.

Four years later, with all the sudden changes in the market, the company shares that it was able to easily facilitate the connection between its stakeholders and ecosystem partners like wallets and payment aggregators. 

Doing the right transition at the right time certainly paid off in this case, but without proper support and infrastructure, sustaining and growing operations will be difficult. 

It certainly helps that BPI has partners that assisted them to become digitally-enabled at its core. 

Looking towards a digital-forward now

Being digital-ready means more than having an app or website. It needs to create shareholder value and it needs to be scalable in an ever-changing world. It also needs to be secure since it deals with hard-earned money of the masses, and convenient to allow mobility and further growth. This is where Backbase comes in. 

Backbase is a fintech software provider that aims to empower financial institutions to accelerate their digital transformation and effectively compete in a digital-first world. The company created the Backbase Omni-Channel Banking Platform, a state-of-the-art digital banking software solution that unifies data and functionality into a seamless customer experience.

"Backbase as a solution provides a central orchestration hub, more like an engagement banking platform, which allows a bank like BPI to manage all its operations from a single channel," added Backbase Regional Director Riddhi Dutta.

They are helping banks like BPI become digital at its very core – offering seamless digitized solutions in an uncomplicated platform.

Adapting to the next normal

There is no doubt that digital transformations can no longer be delayed. Adapting is key no matter what industry you are in. It all boils down to how financial institutions will handle this much-needed shift and what they will get out of it. 

"It is not about fancy screens or the best mobile app or the most user-friendly interface, it is about understanding what kind of differentiation you bring to the economy, not just for the customer," said Santiago.

A report published by Backbase and the International Data Corporation (IDC) called Fintech and Digital Banking 2025 reveals outlooks and opportunities for the Philippines' banking industry until 2025. 

"I think the Philippines will have the largest market share in terms of migration of customers from traditional banks to what we call as digital-first banks," said Dutta. 

More than just a cost-efficient move, digital transactions are also becoming a pivot for growth in terms of revenue. It is helping more financial institutions grow their digital sales by making financial services available and accessible on a space that the majority can access. 

The report has also brought up the question, can banks really do everything? Or is it better for them to be enablers and bring in specialists and service providers to the overall ecosystem to provide a better, all-encompassing service to their stakeholders?

"That is also very important which our report with IDC highlights. Banks that sort of cling on to the value chain and try to do everything on their own, they are setting themselves up for failure." Dutta added.
Another aspect to look into is servicing small and medium-sized enterprises (SMEs), especially in the Philippines where a big chunk of business falls in this category. 

"While there is a lot of focus on doing digital transformations for your consumers and retail customers, I think the next wave is gonna come purely when it comes to how do we digitize processes and offerings so that these small and medium enterprises can do their business, can do payments, can do invoicing in a much more seamless and contextual manner," said Dutta.

In summary, the report highlights three areas of growth worth looking into in the banking industry – digital sales, open banking partnerships, and digitization for SMEs. 

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Circumstances are changing every day, while there is much disruption, there is also plenty of opportunities for improvement and progress.

As the health crisis continues to bring changes, both good and bad, it has also brought momentum to digital banking. People are realizing that it is safer, quicker, and more convenient. Digital connectivity may very well be the answer to financial inclusion. 

As BPI's story exemplifies, investing in the future pays off. And with software providers like Backbase, the transition to digital does not have to be overly complicated. 

More financial institutions are accepting that digital will be a major part of the future, and that foresight and readiness for change are important factors to stand out in a digital-first world. 

To know more about Backbase and its services, visit its website. You can also follow its official Facebook and Twitter pages.

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