PHILIPPINE banks should develop a clear strategy for the use of artificial intelligence (AI) and build digital and data technologies faster, a global business analyst said.
McKinsey & Co. said banking in the future will be dominated by “AI-first banks” that can collect relevant customer data, analyze them faster, design products targeted to certain customer segments, and launch their products faster.
Its report shows 20-50% more consumers around the world will shift to online and mobile banking, while nearly 60% of global financial institutions have integrated one AI tool in their systems.
McKinsey added the use of AI will increase by 25% each year.
However, McKinsey said Philippine banks still struggle in deploying AI quickly across their operation channels for two reasons.
First, they lack a clear strategy for adopting AI. McKinsey said banks should specify the uses of the technology in their business units.
“They need to translate the general excitement that management teams have about the potential for AI into an actual, enterprise-wide AI strategy,” Kristine Romano, McKinsey’s managing partner in Manila, said in an e-mail.
Second, many local banks operate with outdated technologies. McKinsey said this slows their product development and launch.
“Many Philippine banks run on weak underlying technologies that limit how quickly banks can innovate and bring new products and services to market,” McKinsey Associate Partner Shwaitang Singh said in an e-mail.
To improve their services, analysts said Philippine banks should engage all units in crafting an AI-centered strategy.
“Business and technology teams at many Philippine banks still work in siloes. They should collaborate more closely to translate business requirements into effective technology tools that benefit the bank and its customers,” Ms. Romano said.
McKinsey also said local banks should invest more in technology focusing on data to raise more profit while they deliver convenient services.
“Processes within the banks are still largely manually driven. While there is an abundance of data, the fact that it is not digitized means it’s not easy to analyze and get useful business information from,” Mr. Singh said.
The analysts said the AI shift also requires the development of a universal digital ID system, external infrastructures and credit bureaus.
The government is fast-tracking the establishment of a national ID system that uses QR codes containing the personal and government data of an individual. It is set to be operational by 2022 and complies with the Philippine Identification System Act.
The government also set aside P2.4 billion in the 2021 budget proposal for internet connection nationwide.
Meanwhile, state-run Credit Information Corp. continues to partner with banks to provide an online database for over 18.2 million borrowers. — Kathryn Kristina T. Jose