Of millennials and banking

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By Karl Angelo N. Vidal, Reporter

AT TIMES, finding time to do mundane tasks such as paying bills or transferring funds to loved ones could be challenging. In doing so, one has to line up in kilometric lines in banks or payment centers, resulting in foregone time that could have been spent on doing something else.

Thanks to mobile banking, one has the option to do these things on a few taps and clicks.

“Mobile banking kind of streamlined the way I run errands because I can instantly pay my bills with just a click, and I can transfer funds without having to go and line up in a bank,” said Marcelli Q. Papas, a multimedia producer.

“I also monitor my investments online, because the bank has a portal for it that I can check every once in a while,” she said.

Ms. Papas is only one of larger demographic called “millennials” taking advantage of mobile banking. And just recently, this technology received an update by introducing near real-time fund transfers from one bank to another financial institution.

But the 21-year-old multimedia producer is also wary of the risks that comes with using the platform.

“I think user-friendliness and privacy measures are needed to be improved to enhance mobile banking not just among millennials like me, but also to older markets as well,” said Ms. Papas.

“User-friendliness of banking apps and portals can help streamline user experience, making processes more understandable.”

Ms. Papas also said that financial institutions should also make it secure and updated, giving “customers peace of mind when it comes to the digital security of their money and other private information.”

For most who loath to bring money, or shop mostly online, mobile banking is a joy to use.

The latest technology boom in recent years has played a key role in shaping up the behavior and attitude of millennials. Unlike the previous generations, this generational gap has been magnified as millennials were brought up at the time where computers, mobile phones, and the Internet were becoming more accessible.

These technological advances consequently led to the desire for swift and seamless transactions, leading players in various industries to find new ways to do business and attract these “digital natives.”

The banking industry is no exception to this gradual shift to doing business in the digital space.

“This generation were born [at the time] when the Internet is booming,” Abigail Marie D. Casanova, consumer business and operations group head of Security Bank Corp., told BusinessWorld in an interview.

“What is the behavior when the internet is gaining popularity? Everything becomes instant. Most of the things are instant, fast and online.”

Banks could not afford to miss out on tapping the millennial market segment. In the 2017 Digital Banking Consumer Survey conducted by PricewaterhouseCoopers (PwC), 82% of smartphone users aged 18-24 use mobile banking regardless of income level. The same research also noted that consumers who use only digital channels jumped to 46% last year from 2012’s 27%.

As the demand for digital channels continues to grow, banks lean on the said platform to reach younger customers.

“With online and mobile banking, you can now do transactions that you normally would go to the bank with your phone. What can you do? You can do payments, you can pay your cards, you can pay bills, you can do e-gifts,” Ms. Casanova added.

Banks have likewise cited the Bangko Sentral ng Pilipinas’ (BSP) initiatives in enabling them to conduct digital banking, and therefore reaching out to millennials, easier.

Joseph Albert L. Gotuaco, retail banking head of Bank of the Philippine Islands (BPI), said that the central bank has been “very receptive” to the idea of digital banking, citing the National Retail Payment System (NRPS) initiative as an example.

“In fact, I would say it’s the other way around: the BSP has helped us with innovation,” Mr. Gotuaco said.

Unveiled in 2015, the NRPS is poised to steer financial transactions gradually from cash and cheques to electronic fund transfers. As a result, merchants and suppliers will be able to collect payments real-time and workers will receive their salaries either through automated teller machines (ATMs) or mobile wallets.

“We take NRPS very seriously because millennials want to do things quickly for them, and convenience is key. In fact, what is important to us is to make banking possible without [them] coming to the branch,” BPI’s Mr. Gotuaco said.

For her part, Security Bank’s Ms. Casanova cited the central bank’s plan to allow financial institutions to conduct client identification and verification through electronic means, making the opening of accounts and loan applications easier.

“This will be helpful such that we no longer have to see or do face-to-face KYC (know your customer)… [A]n electronic KYC will be a substitute to it.”

The appeal for convenience led banks to get in touch with millennials through social networking sites to sell their products, link their clients to mobile and online banking services, and receive questions and complaints from customers.

“To engage the millennials, we go where they are. Where are they now? They’re on social media,” Ms. Casanova said.

Margarita B. Lopez, digital banking and operations group head of Rizal Commercial Banking Corp. (RCBC), concurred: “We go social, that’s essentially it. We go to YouTube to introduce banking products and its uses…,” she said.

Ms. Lopez has noted the importance of millennials in their business operations as they make up “about 50%” of their customer base.

One of the popular products millennials avail online are prepaid cards.

“Since they’re starting out, our millennial customers usually avail prepaid cards because they don’t have a lot of money — they still don’t have a credit line,” BPI’s Mr. Gotuaco said.

Prepaid cards, according to Mr. Gotuaco, are a big hit to the market segment since customers can avail of a card that can be used for digital payments without opening a savings account.

“A millennial will open a prepaid card mostly because they cannot open a bank account easily. You can use your prepaid card just as easily as an ATM card (Both of them are Visa or Mastercard). You can spend them in many different outlets,” he said, although he noted that BPI “tries to make it attractive for millennials to open an account.”

For RCBC, Ms. Lopez noted that it offers “virtual” prepaid cards, enabling customers to have prepaid banking accounts without the plastic card. These virtual wallets, she said, can be very helpful with how millennials manage their finances.

“We understand millennials want to enjoy their lives, but they should be cautious [with their money]…,” Ms. Lopez said.

“[W]e tell our young customers to set aside a little bit of their money, and then they can put the rest into their prepaid cards to be used for their lifestyle.”

Despite the digital platform’s rising popularity, traditional banking still has its uses.

According to a report conducted by information technology firm Unisys Corp., younger Filipinos are less inclined to use artificial intelligence for online loan assessment, both for credit cards and home loans, than the other generations.

“Filipinos aged 18-24 are the least comfortable applying for a credit card online. This may seem odd for tech-savvy millennials, but it is likely because they have less experience with lending and so require more human interaction to answer questions and provide advise,” Richard Parker, vice-president for financial services at Unisys Asia-Pacific, said in a press conference last March.

In this case, the digital aspect of banking will serve as a complement to branch banking rather than a substitute.

RCBC’s Ms. Lopez explained that making transactions at the bank is still necessary when availing of “more complex banking products” such as loans and investments since it’s required by regulation.

BPI’s Mr. Gotuaco agreed, adding that BPI has adapted the so-called “omnichannel” strategy where digital platforms complement traditional modes of banking.

“We’ve created an online way of scheduling an appointment in the branch if you have a cheque you want to deposit into your account so you can leave right away without talking to anybody,” Mr. Gotuaco explained. “You don’t have to spend too much time inside the branch or step inside the branch too far to do that.”