Note: This is a speech delivered by the author during the Digital Banking Online Event Asia on Nov. 10, 2020.
As chairman of the Digital Banking Online Event Asia Philippine Track, I welcome everyone to this exciting, relevant and timely event to talk about the prospects, challenges and opportunities in digital banking across the region.
The coronavirus is by far the biggest disruptor across the globe, spurring the acceleration of digital transformation among all organizations. As the popular meme put it, ‘Who led the digital transformation of your organization? Is it the CEO, COO, CIO? The answer: it’s Covid-19.”
Indeed, the coronavirus abruptly changed the way we live, work and interact with each other. The resulting social distancing and work-from-home phenomena are inciting banks across Southeast Asia to accelerate their digital transformation strategies. Those who will rise as winners would capitalize on innovations, business models and strategies that fully leverage on the changes brought about by the crisis. Laggards would likely and swiftly lose customers to adaptive competitors.
The Philippines, in particular, is experiencing a boom in digital banking because of the Covid-19 pandemic, with incumbent digital-only banks and digitally transformed banks reaping early wins while legacy banks quickly upgraded their online offering.
Several digital-only banks are also planning to enter the growing Philippine market. But Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno stressed that “we will put emphasis on the quality over quantity of players in expanding the digital financial ecosystem.”
The shift to and opportunities in digital banking are all supported by figures from the BSP.
In May, the BSP reported that the volume of ATM transactions in Luzon had declined by 25 percent since the onset of the enhanced community quarantine (ECQ) while the value decreased by 30 percent.
In a speech delivered by Governor Diokno during the 52nd Annual Finex Week Conference on Oct. 4, 2020, he said “a total of 13.7 million transfers worth P325 billion of combined PESONet and InstaPay transactions were recorded for the first 45 days under ECQ. These numbers represent a substantial upswing by 18 percent in volume and by 25 percent in value compared with the same time span before the ECQ.”
Furthermore, he reported that “we also saw a remarkable rise in the volume and value of payments made from August 2019 to August 2020. Over this 12-month period, InstaPay registered a growth rate of 820 percent in volume from 3.2 million to 29.0 million transactions, and 499 percent in value from P24 billion to P141 billion. PESONet transactions more than doubled, with the volume surging from 1.1 million to about 2.7 million, i.e., by 143 percent year-on-year. Total value rose from P118 billion to P253 billion, or by 114 percent over the same period.”
As a backgrounder, InstaPay was launched by the BSP in April 2018 as part of its efforts to raise the share of digital transactions to 20 percent by this year. Account holders can transfer up to P50,000 ($1000) a day through the system, which is intended to facilitate urgent personal transactions, and is currently offered by 45 financial institutions.
PesoNet, on the other hand, is offered by 56 financial institutions and is designed for businesses and government bodies to make efficient high-value transactions.
Several local banks also reported huge spikes in digital banking signups. For March, UnionBank reported a 160-percent increase in daily signups to its online and mobile banking platforms while new account openings through its UnionBank Online platform were 2700 times higher than a year ago.
With all these acceleration in digital banking, Governor Diokno projected that the share of digital transactions should reach at least 50 percent by the end of his term in 2023. To achieve this, the BSP recently launched its three-year digital payments transformation roadmap, which aims to to have 50 percent of retail payment transactions to shift to digital and 70 percent of adult Filipinos to have formal accounts by 2023.
There are indeed opportunities, as well as challenges during this pandemic. We have a host of powerful speakers during the day who will give their evaluations and appraisal of these.
Our first speaker is Philippine Sen. Grace Poe, who will talk about “Covid-19’s impact and implications to Financial Services,” to be followed by other esteemed speakers who are experts in their own rights.
I hope you will all gather insights from this online event. Enjoy the rest of the virtual conference.
The author is the chief executive officer of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is an institute fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA program of De La Salle University. The author may be reached at firstname.lastname@example.org.