By now, many Filipinos — especially the younger ones — have enrolled in a digital app or downloaded one for use, be it from any of the major banks or new entrants approved by the Bangko Sentral ng Pilipinas.
Digital banking reeks of convenience: pay anywhere, buy anywhere and essentially transact anywhere as long as your phone is with you. It removes the need to go to a physical bank and this behavior became go-to, especially during the pandemic. Everyone has picked up on this.
Lending is the biggest revenue contributor for banks and a lot of marketing talk covers discussions on how lending can be widely used by the bank’s customers across all segments. To us bank account holders, this refers to borrowing.
Banks and similar financial institutions need to segment their customers in order to offer more personalized products and understand their specific needs. It is in this segmentation that customers can be understood better and products offered more deliberately and with intention.
In our consulting work, the consumer base can be segmented via generations, i.e. Generation Z, Millennial, Generation X and Baby Boomers. Financial institutions usually segment their retail customers according to life stages and financial journey, such as those creating wealth, those accumulating wealth, those preserving wealth and those distributing their wealth.
In all these instances, different products and services come in handy and financial institutions need to work on which product or service suits what need best. It is then a question of how digital banking can address such requirements, especially from those preferring to stay put where they are without having to go to the bank to access services.
Those creating wealth will be interested in products offering good interest rates. Popular choices in this segment include newly minted digital banks that use interest rates as acquisition. Even Pag-IBIG’s MP2 program commands interest given a high yield within the five-year program period. Liquidity and access to cash are also important for this segment and borrowing from financial institutions may be a wise choice.
Those accumulating wealth, meanwhile, will have invested in properties and businesses, and may be good prospects for lending related to such, those preserving wealth will be also looking into investments, and those distributing wealth will be interested in estate planning.
Life milestones require different services or products and financial institutions need to be creative in marketing or creating such. The buy now, pay later scheme is a popular and global trend — it is essentially a loan but is marketed differently, hence creating interest among those who may need it. In this case, banks can attach themselves, armed with this scheme, to e-commerce platforms as it would stretch the purchasing power of the customer.
The use of nudges is also one way of encouraging borrowing as digital behavior is studied and analyzed and financial institutions have become smarter in sending offers. You may be browsing for electronic gadgets to gift yourself and next day receive an email from your bank about a buy now, pay four months later promotion for the gadget you were eyeing.
It will be wise for banks to continuously study their customers to make sure credit is accessible all the time. Digital banking cements this further due to the online behavior captured.
Kay Calpo Lugtu is the chief operating officer of Hungry Workhorse, a digital and culture transformation firm. Her advocacies include food innovation, nation-building and sustainability. She can be reached at kay.lugtu@hungryworkhorse.com.