The banking sector has a long history, but the emergence of fintech has greatly transformed the operations of banks.
Fintech, short for financial technology, has caused a major change in how financial services are accessed, used, and controlled. In the Philippines, the emergence of the digital economy has opened up a new market for digital finance, giving traditional banks the chance to increase and diversify their offerings.
A recent report from McKinsey & Company predicts that the number of people in the Philippines who are eligible for banking services will increase by 30% between 2022 and 2030, going from 65 million to 85 million. As a result, financial organizations are embracing modern technology in order to provide more customer-focused, streamlined, and convenient services.
The emergence of Fintech has brought about a fresh era of banking that is more attainable, particularly for individuals who were previously without access to traditional banking services or had limited access. The Bangko Sentral ng Pilipinas (BSP) has set a goal to achieve a 70% digital banking inclusion rate among adults in the Philippines and a 50% rise in digital retail transactions by 2023.
Furthermore, financial technology meets the expectations of millennials and Generation Z, providing them with a variety of payment options and convenience. This technology allows for a smooth and effortless experience across all platforms, such as mobile, online, and in-person banking.
The growth of digitalization and the push for financial inclusion in the Philippines has propelled the development of the fintech industry. As a result, there is a growing demand for efficient banking solutions from customers who value speed.
As reported by McKinsey, nearly half of the adult population in the Philippines does not have access to traditional banking services. However, the emergence of fintech has provided individuals with increased opportunities for financial inclusion, leading to economic development and poverty reduction.
The rise of financial technology has resulted in the creation of digital banking, enabling customers to conveniently access banking services using their mobile or computer devices. The Philippines is following the lead of other major Asian countries, with the approval of numerous digital banks by the BSP prior to 2021.
Digital banking allows customers to perform transactions and manage their finances anywhere at any time. People can now open bank accounts, apply for loans, and make transactions online without visiting a physical bank.
The emergence of digital banking was driven by increased consumer expectations for faster and more convenient methods of managing bank accounts and conducting financial transactions beyond traditional branch locations.
One example is EastWest Bank, a long-standing financial institution in the Philippines, which has embraced digital banking early on.
The first digital-only banking service in the country, Komo by EastWest was introduced in 2020. Unlike traditional banks, Komo does not have a minimum balance requirement. It also provides a savings account with a 2.5% interest rate, Visa debit cards, and digital checking accounts. Users can make unlimited free withdrawals at any EastWest ATM and up to four free withdrawals per month at other BancNet ATMs.
This new feature allows customers to have more authority over their financial matters by utilizing self-service options and keeping track of their accounts in real-time. These are valuable advantages of using online banking.
Furthermore, fintech provides avenues for electronic payments, enabling individuals to settle bills, send funds, and make online purchases.
Per the World Bank, the COVID-19 crisis has resulted in a rise in the usage of electronic transactions around the world. This includes over 40% of individuals in low and middle-income countries making their first ever in-store or online purchases from merchants since the onset of the pandemic.
In the Philippines, there has been a rise in the use of digital payments as consumers shift away from using cash due to the effects of the pandemic.
LS, the unemployment rate has decreased to 5.8%
Based on a study conducted by the Bureau of Labor Statistics, the percentage of unemployed individuals has dropped to 5.8%.
In 2022, there has been a significant rise in the usage of digital payments, with a 42.1% increase in volume for all retail transactions. In monetary terms, digital payments now make up 40.1% of all retail payments, totaling US$78 billion.
The use of smartphones and the rise in internet users are contributing to the expansion of digital payments in the Philippines. These patterns are predicted to persist as more individuals are anticipated to embrace mobile technology in the coming years.
Moreover, the introduction of new ideas and practices in the banking industry plays a crucial role in driving the progress and prosperity of the financial sector in the Philippines.
EastWest Bank has developed a digital payment channel with EastWest Pay App, a mobile payment application that allows EastWest Visa credit cardholders to pay by hovering their phone over a merchant’s point-of-sale terminal. The EastWest Pay App is the Philippines’ first mobile application that turns an NFC-capable Android device into a VISA EMV contactless card.
The EastWest Pay App stands out from other mobile payment apps by enabling customers to use their credit card account for in-store purchases without having to load the app beforehand. Additionally, the app provides access to credit balance, spending limit, and available credit limit for customers.
This advancement demonstrates that banks and financial establishments have elevated their investment in technology to match the rising demands of consumers and deliver streamlined financial services.
The arrival of EastWest Bank’s new financial system, along with contributions from other players in the banking industry, marks the start of a transformation for the sector. This development presents potential for enhancing procedures, increasing revenue with a wider range of products, and sparking innovative approaches.
Hence, a crucial factor in promoting innovation in the banking industry is the utilization of digital resources that facilitate progress in fundamental operations as well as cultural innovation. This involves implementing specific actions to establish alternative models that are more responsible and sustainable.
The rise of financial technology and the current global health crisis have led to a rise in investments and utilization of technology.
Additionally, the use of financial technology accelerates transactions within the country, leading to a quicker recovery of capital and generation of income.
McKinsey reports that outdated information systems and low tolerance for risk have deterred traditional banks from pursuing untapped markets, specifically those with customers who have limited credit histories and smaller transactions. Yet, these banks are now utilizing financial technology to enhance their processes and improve customer satisfaction.
Due to the advancements in digital technology, there has been an increase in financial accessibility in developing economies. As a result, traditional banks are expanding their range of products and incorporating technology-based services in order to enhance their flexibility and stay competitive.
According to a recent report from the Asian Development Bank, utilizing advanced technologies to enhance platforms is the most basic way to achieve financial inclusion. As a result, fintech has the potential to speed up overall economic growth and promote financial inclusion and literacy.Mhicole A. Moral