Banks go phygital, mobile amid vicious market

With the surge in internet and smartphone use after the pandemic, traditional banks continue to redesign their branches, products and services to stay relevant, especially to low and middle-income classes and small entrepreneurs.

E-wallets, digital banks, and other financial technology (fintech) firms have seized a substantial share of the market as their fully online and mobile-based services save customers time, energy and money.

The success of fintech firms has been evident, as they increased from 216 to 299 in the last three years based on data from Fintech Philippines. They include the six digital banks in the country.

Building on this momentum, global market researcher Statista projects mobile banking in the country could grow by 25 percent annually until 2029.

As more Filipinos are expected to process financial transactions online, banks have introduced phygital branches and are reaching out to more customer segments through their phones.

Phygital branches

“There are very transactional services like fund transfers or payments and we want people to do that on their phones or BPI Mobile app,” Bank of the Philippines Islands (BPI) president and chief executive officer TG Limcaoco said.

Phygital branches are physical branches renovated to integrate digital technologies to perform basic banking transactions, preventing long queues of customers in the branches.

Limcaoco also said phygital branches enable less tech-savvy clients to start being accustomed to mobile banking, while the staff in the branches focus on discussing more complicated banking products with the clients.

“We’re working on the concept that our branches are places where you can learn, where people can go and ask questions rather than do transactions,” he said.

The 173-year-old BPI has transformed 26 branches into phygital branches which feature kiosks and meeting pods, among others. BPI head of consumer banking Ginbee Go said the bank aims to complete the phygital transformation of 57 more branches.

Go said BPI mobile banking has benefited 70 percent of the bank’s clients as it looks to attract 50 million clients in the next few years.

Meanwhile, Union Bank of the Philippines (UnionBank) is enhancing its app to also make financial transactions faster and decongest physical branches.

“UnionBank online is the most downloaded and highest rated app in Google Playstore, with over 10 million downloads,” UnionBank president and chief executive officer Edwin Bautista said.

Following the launch of the app, Bautista said UnionBank clients have increased by 2 million each year.

“To ensure success, UnionBank will integrate traditional products into its mobile platform, reaching out to underserved and unbanked Filipinos,” he added.

Diverse customers

With the booming technological advances, traditional banks are seeking tech-driven firms and startups to expand customer segments, including drivers and farmers in rural areas.

SeaBank Philippines Inc., a mobile app-based rural bank, seems to be a new challenger and proof that rural residents are economically progressing.

It marked its first profitable quarter this year with a 252 percent growth in net income to P110.7 million from January to March.

Since SeaBank’s app was launched in 2022, its loan portfolio expanded by 127 percent to P13 billion. Meanwhile, deposits jumped by 75 percent to P20.23 billion.

To boost its business loans, BPI recently launched new agricultural loans to small-scale farmers in partnership with Agrilever, a provider of an app that tracks farm production and sales.

The app also recommends the proper crops, fertilizers, and pesticides farmers must use to increase harvest based on its weather forecast and soil analyses.

Agrilever uses satellite data and artificial intelligence or AI which is a computer capability that collects and analyzes various types of data and detects trends.

Through the app’s data, BPI Direct BanKo, the microfinance arm of BPI, can determine farmers who are earning profits and lend them extra funds to grow their businesses.

At the same time, the bank can protect funds from depositors and other borrowers.

“Agriculture is the oldest profession in the world, and it started when you didn’t need credit because it was only your sweat and nature that got you,” Limcaoco said.

“With people leaving agriculture, we need to make it more efficient, and the only way to make it efficient is you need to provide credit,” he stressed.

With more predictable income among farmers, banks can offer low interest rates and ensure most sectors contribute to the national economy.

“We invest in their abilities to be able to provide food on our table, thereby we’re investing in the Philippines,” BPI Direct BanKo president Rodolfo Mabiasen Jr. said.

Meanwhile, UnionBank teamed up with motorcycle taxi firm Angkas.

“Our collaboration with Angkas will bring banking services to about 200,000 motorcycle drivers in Metro Manila,” Bautista said.

Through loans, Angkas chief executive officer George Royeca said motorcycle drivers can put up their small businesses, such as eateries and sari-sari stores, to gain financial security.

“We already started offering loans with small amounts. But we are partnering with other firms, such as banks and motorcycle dealerships, to provide loans,” he said.

Angkas has 19 million drivers, of which Royeca said 99 percent are low-income and informal workers.

Security Bank is also partnering with financial technology firms to tailor products and services to micro, small, and medium enterprises or MSMEs. They include better cash flow and payment management.

“The first version of the digital platform will be an update of the DigiBanker which has been great and we want it to be more suitable to MSMEs and sole proprietors. We have been in discussions with various fintech firms and hopefully, we’ll have something to announce,” Security Bank senior vice president and head of business banking segment John David Yap said.

In the first quarter, Security Bank already boosted its MSME loans by 74 percent compared to the level in the same period last year.

Overseas Filipino workers or OFWs are also benefiting from digitalization as the state-owned Land Bank of the Philippines recently launched GoBayani.

GoBayani is a mobile savings account that does not require initial deposit and maintaining balance.