Thrift banks poised for growth

Amid evolving opportunities

MANILA, Philippines — Amid the changing landscape of the country’s banking sector, thrift banks are emerging as key players poised for significant growth as they capitalize on market opportunities and cater to the credit demand of households and small businesses.

Chamber of Thrift Banks (CTB) president Cecilio “Paul” San Pedro said these mid-sized banks are adapting swiftly to capitalize on new trends and technological advancements amid changing consumer behaviors.

“Our member-banks can look forward to a future full of growth opportunities,” San Pedro said. “By remaining adaptable to evolving customer needs and market trends, member-banks can position themselves for success in an increasingly dynamic and competitive banking landscape.”

According to the CTB chief, thrift banks can anticipate a range of growth opportunities that will shape their future prospects and ambitions.

First and foremost, the ongoing digital transformation within the banking sector presents significant avenues for expansion. Member-banks can improve their digital platforms, develop user-friendly mobile apps and implement innovative digital solutions to cater to customers’ changing preferences.

Collaboration with fintech companies also emerges as a strategic pathway to growth. By partnering with fintech startups, member-banks can harness advanced technologies to enhance service delivery, streamline internal operations and introduce innovative financial solutions that meet the diverse needs of their customer base.

Another key opportunity is focusing on supporting small and medium-sized enterprises (SMEs). Member-banks can focus on offering specialized financial services such as tailored lending products, advisory services, and digital tools aimed at fostering the growth and success of SMEs, a crucial segment in the economy.

The rising emphasis on sustainability also provides member-banks with opportunities to develop green financing options, socially responsible investment products as well as initiatives aligned with environmental and ethical considerations, catering to an increasingly eco-conscious customer base.

Exploring cross-border banking opportunities is also on the horizon for member-banks. Thrift banks can expand their services internationally by tapping into international markets. This would allow the banks to cater to the needs of customers with cross-border financial activities, remittances and international business ventures, thereby broadening their market reach.

Moreover, focusing on financial inclusion by serving unbanked and underbanked populations through inclusive banking initiatives can drive growth. Member-banks can design accessible products and services tailored to meet the financial needs of marginalized communities.

Adapting to regulatory changes also present another avenue for growth as favorable regulatory changes can create opportunities.

Member-banks can benefit from supportive regulatory environments that encourage innovation, simplify compliance processes and enable the introduction of new financial products and services.

Given the increasing importance of data security and privacy, member-banks that prioritize robust cybersecurity measures and safeguard customer data will not only enhance trust and confidence but also gain a competitive edge in the market.

Finally, forging strategic partnerships with other financial institutions, technology providers or non-banking entities can create new growth opportunities and expand member-banks’ service offerings, fostering a collaborative ecosystem that drives innovation and customer-centric solutions.

San Pedro said that the thrift banking industry has encountered numerous challenges in the past year, including digital transformation, cybersecurity, competition, regulatory changes and economic uncertainties.

“While embracing digital technology is essential, it also poses challenges in terms of infrastructure readiness, customer education and ensuring the security of online transactions,” he said.

The risks of cyberattacks and data breaches become more significant as well with the rising number of digital transactions. Thus, protecting customer information and maintaining system security are crucial in bank operations and should be prioritized, he said.

The industry also faces intense competition not only from traditional banks but from fintech startups and digital banks that offer innovative services and convenience to customers.

Regulatory changes also become challenges, San Pedro said, which underscores the importance of discussions, clarity and understanding between the banks and the BSP.

“Evolving regulatory requirements pose some challenges for thrift banks, especially if they lack the resources to adapt quickly to new rules and regulations,” he said.

Economic fluctuations and the impact of external factors has also affected thrift banks in the previous years, as these could adversely impact loan quality, repayment rates and overall stability of the sector.

Amidst these challenges, San Pedro said thrift banks were prompted to strategize and prepare to mitigate risks.

First, thrift banks have been investing in upgrading their digital infrastructure and enhancing user-friendly platforms. Banks are also providing training and educational resources to customers to ensure smooth digital adoption.

“Banks are ramping up their cybersecurity measures by implementing advanced security protocols, conducting regular security audits, and investing in employee training to prevent and respond to cyber threats effectively,” he said.

On top of these strategies, banks are also offering customer education programs to address challenges related to digital literacy and cybersecurity awareness. These programs help customers understand digital banking features, security best practices, and how to identify potential scams.

Thrift banks are also proactively staying updated on regulatory changes and collaborating with industry associations to ensure timely compliance. Mid-sized lenders are allocating resources to adapt to new rules while maintaining transparency and governance.

“In response to economic uncertainty, thrift banks are strengthening their risk management practices. This includes refining their credit assessment processes, diversifying loan portfolios, and stress-testing their financial models,” San Pedro said.

Partnerships and collaborations are also crucial. Some thrift banks have forged strategic partnerships with fintech companies to leverage their expertise and technology solutions. This enables banks to offer new services quickly and efficiently.

“By embracing these strategies, thrift banks aim to navigate the complex landscape and position themselves for sustainable growth in the face of ongoing challenges,” San Pedro said.

Over the past five decades, CTB has faced several challenges and seized numerous opportunities. It also played a significant role in shaping regulatory reforms for the thrift banking sector such as the Thrift Banks Act of 1995.