Philippines’ newest neobank aims to disrupt the industry with a dash of personality

Tonik Digital Bank wants to become the first bank brand in the country with “a sense of humor.”

One of Philippines’ first digital-only bank aims to disruptor the local banking sector with two things: one, through their convenient, digital banking services with competitive rates; and two, through their unique and quirky personality.

Debuting just last 30 March, Tonik Digital Bank kicked off operations with a market-leading deposit rate of 6% per annum (pa), and touted their goal to be known as a bank with a personality—or, as local president Long Pineda said, become the first bank brand with “a sense of humor and personality” in the Philippines.

“Sadly, traditional banks have completely forgotten how to listen to their customers. So, we are on a quest to become the first bank brand in the Philippines with a sense of humor and an actual personality that consumers can relate to,” Pineda said.

Already, Tonik Digital Bank have secured $20m (PHP1b) in retail deposits within only a month of going live—a historic record for any new bank launching in the country, said Greg Krasnov, founder and CEO of Tonik, the parent of Tonik Digital Bank and a Singapore-based fintech company.

“The Philippines is one of the most digital-savvy countries in the world,” Krasnov told Asian Banking & Finance in an interview. “An overwhelming percent of the population are connected online and are avid users of smartphones, around 98.5% according to a 2021 study by We Are Social. That is a considerable number given that there are almost 111 million Filipinos now.”

In contrast, 77% of Filipino adults remained unbanked, or 51.2 million of the 72 million local adult population, according to 2020 data from the BSP.

This low banked percentage and high smartphone penetration equals a massive opportunity for digital-only banks to fill the gap—a market with potential values of up to $140b in retail deposits and $100b in lending.

Asian Banking & Finance caught up with Krasnov, Tonik founder and CEO, to learn more about their plans to break the Philippine banking mold and lead the way for a new era of digital banking in the country.

At the announcement of your official launch, Tonik Digital Bank president  Long Pineda said that your goal is to become the first bank brand with “a  sense of humor and personality.” How does your bank aim to do this, and how does this reflect Tonik’s vision in offering a better customer journey to  Filipinos?  
Indeed, one of the things that makes us unique is our humorous and quirky  personality. This is evident in all our communication channels, especially in  the tone of our app. We take pride in being the only known bank in the  country who addresses our customers as “luv” or “hun”. Through this, we aim to make customers feel at ease and not intimidated of their banking  partner, unlike how most traditional players who speak in more of a “stiff”  and “corporate” style. We want to make them feel welcomed in starting  their “neobanking romance” with us—a relationship that is warm and built  on mutual trust and transparency. 

Tell us more about your products and services. Who is your target customer base? What services do you offer, or plan to?
Tonik offers accessible, flexible, and inclusive financial services, including  industry leading deposit interest rates of up to 6% per annum, and unique  saving features such our Solo Stash and Group Stash products. Further, we offer industry leading rates for these stashes: up to 4% for solo and 4.5% for group. This allows for more convenience and better opportunities for customers to save and actually grow their money with us—a far cry from the tedious process and frustratingly low rates that they are accustomed to with traditional banks.

Our target market has always been the majority of the adult population (around 70%) who are tech-savvy but are currently either underserved or unbanked. This is driven mostly by the lack of better alternatives or  financial services that they can openly communicate with and entrust their money to without being intimidated or confused. The technology and usage are steadily growing in this market but what needs more immediate improvement on are banking products and services that are more beneficial and attractive to customers.

What is your edge over traditional banks and mobile wallets in the  country?
The advantage of being a neobank over traditional players is the ability to drive financial inclusion to more people in a faster and more cost-effective way. All prospective clients need to have are a smart device, internet connection, valid ID and five minutes to start their neobanking journey or “romance” with Tonik.

On the other hand, the main advantage of Tonik over mobile wallets is we are an actual bank operating under our own license granted by the BSP. This enables us to offer a more diverse suite of retail banking services that are secured and supervised by the BSP such as term deposits, card payments and consumer loans.

What is your view about the current state of the banking sector in the  Philippines? Culture-wise, do you think Filipinos are ready to move away  from traditional banking towards digital-only banking?
As COVID retains its dangerous momentum in the country, most Filipinos will continue to develop and appreciate the benefits of digital banking as this minimizes health and safety risks. Similar to other retail services like shopping and food delivery, the pandemic will have sustained effects to consumer behavior that will be undoubtedly in the direction of digital. 

In your view, how has the pandemic changed the way Filipinos see digital banking?
With the pandemic and its impacts still raging in the archipelago, cash and  physical branch-based banking transactions will continue to be least  preferred and decrease over time. This phenomenon should further  strengthen our purely digital banking proposition in the new normal. 

What is your outlook for digital-only banks in the country?
Neobanks or digital-only banks will continue to propagate in most emerging Southeast Asian markets such as the Philippines. Our rapid customer take up proves that Filipinos are hungry for a financial enabler that makes banking simplified, non-intimidating, digital-driven, and actually makes their money grow. 

The new normal had effectively curbed consumer banking behavior and we  can expect that the future will continue to become digital. We can already see this unfolding with key developments in industry regulations and customer expectations who will continue to be on the lookout for and choose banks that encourage a more human relationship built on mutual trust, speed and convenience, rather than usual transactional interactions that are often tedious and frustrating.

Can you give us an estimate of when you believe you will start making a profit?
Our strategy to bolster profitability is to focus on attracting longer-term consumer deposits and developing them into lending portfolios. We are targeting to launch our loans portfolio within this quarter. There is a huge market gap for consumer lending in the Philippines in terms of security, greater returns, and accessibility of services from traditional providers that we aim to address.
Apart from our loan offers, we are working on launching our physical debit cards soon that should enable more customers to do e-commerce transactions more easily and securely. Hopefully through diversifying our suite of services, we would achieve our longer-term vision of climbing up as one of the top 10 banks in the Philippines in terms of assets within the next few years.

What are the biggest challenges that digital banks face in the Philippines—and has your bank overcome these, or plan to?
On the regulatory side, we are fortunate to have an innovation-driven and collaborative regulator with the BSP (Central Bank of the  Philippines) who shares our vision of establishing a digital banking ecosystem. This is a huge step to encourage more players, traditional and  new ones alike, to transform and migrate to digital which should further accelerate financial inclusion. 

The greatest challenge globally is on the technology and security side. We acknowledge that it may still be a long journey in terms of technical  upgrades. As such, we make sure to be working with some of the best cloud platforms and security solutions partners like Mastercard, Amazon Web Services and Finastra to ensure the best and most secure banking experience for our clients. 

How has Tonik Digital Bank been received by the public so far?
We received an overwhelmingly positive response to our commercial  launch last March, having secured over Php1B (USD20M) in retail deposits within only a month of going live—a historic record for any new bank  launching in the country.