Philippine banks need to update strategies for competitive advantage

Less than 10% of revenue is allocated to information technology.

Philippine banks are significantly behind in digital investments, allocating less than 10% of their revenue to information technology, according to a survey by McKinsey & Company. This lag in investment is a critical issue that requires immediate attention to ensure competitiveness in the digital era. 

Fridolin Blumer, CEO & Founder of XiXun Asia, discussed the importance of updating strategies. "Most financial service providers build their strategy traditionally on growth drivers. However, in addition to these, we see nowadays two areas where financial service companies may find a new angle. They are trust and seamless services, which look like a new winning aspect and should be part of a bank's strategy," Blumer stated.

The preference for cash remains high among Filipinos, with 60% still favouring cash transactions. In contrast, the ASEAN+6 average stands at 38%. This indicates a substantial gap and a potential area for banks to innovate and attract customers by adopting new technologies. 

"The trend to cashless may suggest that banks find new ways to attract customers. Such as leveraging social media and FinTech. Incorporating that into your strategy may be a differentiator," Blumer emphasised.

Blumer highlighted the importance of trust in banking, which is closely tied to reliable technology. "Trust comes very much with reliable technology, leveraging new technology in a stable way and embarking on good communication. And banks, especially in the Philippines, may wish to counter any rumours that they are being unsafe, that their technology is not safe and work very hard to showcase excellent and seamless services," he added.

"New technologies may need a bank to become an industry advocate, work with peers and regulators to ensure inter-operationality of these technologies. Together we are stronger and together we can better build an ecosystem," he explained.

Young, tech-savvy individuals are significantly influencing banking operations today. Blumer illustrated this point by referring to social media influencers who can attract prospects through their posts, enabling seamless account openings. 

Blumer pointed out that traditional banks are catching up with digital banks, leveraging modern technology to provide end-to-end processes that allow people to transact anytime, anywhere. He suggested that bundling banking services with mobile phone services could grant access to the necessary infrastructure, building a trusted group of followers.

Blumer remains optimistic about the future of banking in the Philippines. "I think this is a rewarding place for banks to be," he concluded, emphasising the potential for growth and innovation in the sector.