Global Report Reveals Filipino Banks Face Extinction Unless They Embrace Digitisationby Fintech News Philippines September 24, 2021
Three in five banks believe they will cease to exist within five to ten years unless they change their business models, according to a new global research report “Evolve or be extinct” from the Financial Times Focus (FT Focus) and SaaS cloud banking platform Mambu.
The report also identified that two in three believe they will lose market share in just two years if they fail to transform digitally.
Concerningly, banks across Asia Pacific appear to be lagging behind the rest of the world, with less than one third of banks in the region describing their digital transformation strategies as ‘advanced’ or ‘mature’.
The research report surveyed 500 senior banking executives from around the world to gain insights into their perception of the banking industry, both now and into the future.
The research includes responses from senior banking executives from across the APAC region, including the Philippines.
Philippines makes great strides in digital banking
In the Philippines, digital banking has had an incredibly exciting year, with Bangko Sentral ng Pilipinas (BSP) awarding six digital banking licenses to date to PayMaya, UNObank, UnionDigital Bank, and GoTyme, Overseas Filipino Bank and Tonik.
This shows that consumer appetite for digital banking solutions at an all-time high.
However, while there are many banks making great strides digitally, some established banks remain reluctant to take the steps required to truly welcome the digital era.
This is particularly important in a country like the Philippines, where more than 70% of the population is unbanked, and access to financial services remains a pressing issue.
Fortunately, BSP has made digital banking a priority in the country, announcing the Digital Transformation Roadmap in late 2020.
This roadmap includes several very ambitious goals, including increasing digital payments in the country by 50%, encouraging greater innovation within the fintech ecosystem, and boosting the rate of banked consumers to 70 per cent by 2023.
A key factor in the plan is improving infrastructure within the Philippines, with internet access still sorely lacking for many.
Key findings from the report
- One third of APAC banks are concerned that their legacy platforms are holding them back.
- Three in five APAC banks believe they will cease to exist in five-ten years unless they change their business models.
- Less than one third of APAC banks describe their digital transformation strategy as mature or advanced.
- More than half (53%) of global respondents said they are at risk of missing digital transformation targets.
The report also highlights the slow progress and challenges banks are facing as they move away from legacy banking services towards digital, and reflects the need for greater collaboration within the banking community, as well as the opportunities for forward-thinking players that embrace innovation through fintech ecosystems.
On a more positive note, while APAC banks lag behind their counterparts in other regions, it is clear that many are taking steps to ‘catch up’, with plans to increase investment in big data, machine learning and blockchain technologies at significantly higher rates than other regions.
Myles Bertrand, Mambu’s Managing Director APAC said,
“While the strong commitment from APAC banks to increase their investment in new technologies is very positive, banks in the region also need to change the way they approach innovation, and start proactively embracing new partnerships and collaborations. The ‘ecosystem’ approach has been incredibly successful in other regions, and with half of APAC banks concerned that they lack key internal workforce skills necessary to transform, it will prove very effective here too.
“The Philippines has very low formal financial inclusion, but the use of innovative digital financial services like mobile payments and e-wallets is surging which indicates that the market is ripe for disruption. Now is the time for those established Filipino banks that have been reluctant to prioritise their digital transformation strategies to really start making progress. If not, they risk being left behind.”
The research report “Evolve or be extinct” by Mambu and FT Focus is available here.
Featured image credit: Edited from Unsplash