Consumer lending to be banks’ new battleground

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Facade of the Bangko Sentral ng Pilipinas along Roxas Boulevard -- BW FILE PHOTO

By Melissa Luz T. Lopez,
Senior Reporter

CONSUMER LENDING will serve as the main battleground for banks in the Philippines over the next few years, a central bank official said, depending on how fast and efficient players can adopt digital channels to enhance financial services.

“I think the battle would really be on the retail banking. Given advances in technology right now, it’s really more on the digitization — that’s where the battle will be in the next couple of years,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said in a recent interview.

“The name of the game would really be digital over the next couple of years.”

Ms. Fonacier, who heads the central bank’s Supervision and Examination Sector, said lenders are now seeing the retail segment as the new space for competition as corporate lending grows concentrated.

The country’s young population — with a median age of 24, according to the Philippine Statistics Authority — proves that the Philippines is a “very conducive” market to introduce digital banking products, she added.

The same openness to new technology would also help local players maintain comparative advantage despite the entry of more foreign banks looking to capture a slice of the Philippine market, amid growing interest from offshore lenders to cash in on robust economic growth here.

“I think they (local banks) are well-positioned when it comes to competition, but what’s critical is for domestic banks as well to embrace digital transformation because that’s where the future is leading us when it comes to banking,” Ms. Fonacier said.

“For as long as a domestic bank would embrace such kind of advancement and development in that space, then they are well-positioned to compete.”

Ms. Fonacier said she sees more foreign banks expanding in the Philippines in search of better yields and strong growth, taking stock of a strong middle class market in the country.

She recently said that six Asian lenders are in talks with the BSP to set up branches here, which would add to 11 foreign players who have entered the country over the last three years.

Domestic banks have been increasingly tapping digital platforms to complement over-the-counter transactions, especially with e-commerce on the rise. The central bank is likewise embracing electronic channels as it leads the National Retail Payment System, which seeks to shift more transactions to online means in this cash-heavy economy.

The BSP targets to lift the share of digital payments to 20% of total transactions by 2020, coming from the 1% share recorded in 2013.