Unbanked Pinoys to lessen by 20% as more embrace online banking

MANILA, Philippines — The unbanked and underbanked segments in the Philippines is expected to decline to 20 percent of bankable population as more Filipinos are willing to shift to digital banking   amid the pandemic, according to a study commissioned by solutions provider Backbase.

Based on the second edition of the Fintech and Digital Banking 2025 (Asia Pacific) IDC report, three out of five or 60 percent of bankable Filipino customers are willing to shift to banks that are more digital.

Backbase regional director for ASEAN and Southeast Asia Riddhi Dutta said the report highlighted the challenges faced by banking and fintech players across Asia-Pacific and the Philippines amid the pandemic.

“To thrive in a post-pandemic world, organizations will need to keep their customers at the center by focusing on the removal of silos, providing greater levels of convenience, overcoming financial literacy challenges and improving accessibility to lender and payment products. We at Backbase are committed to empowering financial institutions in the Philippines with innovative banking models and experiences that will meet the changing needs of customers here,” Dutta said.

For his part, IDC Financial Insights associate vice president Michael Araneta said organizations must refocus their efforts on becoming even more customer-driven and platform oriented as the events last year have shown the resilience of the financial services industry.

“The insights from the report will help banks, neo-banks and fintechs identify key areas of investment in preparation for 2025 and beyond,” Araneta said.

The report said six of the top 10 banks in the Philippines are expected to launch their own digital banking brands in the market.

It said two digital banks in the Philippines have enjoyed significant growth and are anticipating their customer cases to grow by at least 80 percent every year until 2025.

Meanwhile, some fintechs (financial technology) firms that had gained sufficient size by 2019 also found success, gaining more market share than expected.

The study conducted in the fourth quarter of last year and first quarter of this year showed banks in the region are going back to the drawing board on their digital transformation programs.

Digital banking fitness has been the key factor, with digital banks enjoying three times the growth in customer bases compared to traditional banks.

In response, incumbent banks are reinvigorating digital transformation initiatives, having had to accommodate at least a 50 percent growth in the quantity of digital customer transactions and interactions.

The study said organizations are expected to undertake a comprehensive realignment of customer engagement projects. It noted digital capabilities are the key to resilience and winning the race to recover from pandemic-related setbacks.

“While the APAC banking landscape saw the departure of some neo-banks and fintechs due to COVID-19 challenges, the report predicts that we will still see 100 new challengers across the region by 2025,” the report said.

The latest edition of the report found that 60 percent of banks in Asia-Pacific would leverage artificial intelligence or machine learning (ML) technologies for data-driven decisions, compared to 48 percent from the previous year.

Under its three-year digital payments transformation roadmap, the Bangko Sentral ng Pilipinas (BSP) has committed to raise the level of Filipino adults with bank accounts to 70 percent and the share of retail transactions done through digital channels to 50 percent by 2023.