By Mark Louis F. FerrolinoSpecial Features Writer

For several decades, traditional banks have held a dominant market share with little modification to their business models. These businesses, however, are now facing new pressures as technological advances have taken financial sector by storm, which resulted in the entry of new market players offering consumers a different approach to financial services.

It is now becoming obvious that technological change is the most constructive, and at the same time, the most destructive force in the financial ecosystem today. Incumbents — even established giants — have to adapt, or else they will be left behind as the storm of disruption gets stronger.

This had been one of the key insights discussed at the recently concluded BusinessWorld Economic Forum held last May 30 at the Grand Hyatt Manila in Taguig City, with the theme “The Future of Business: Next-Wave Disruptions and Opportunities.”

In one of the afternoon sessions titled “Financial Technology and the Future of Money,” industry leaders, composed of Frost & Sullivan Asia Pacific Managing Director and Partner Shivaji Das, Bank of the Philippine Islands Chief Digital Officer Noel A. Santiago, Founding Chairman Lito M. Villanueva, and Bangko Sentral ng Pilipinas (BSP) Senior Director and Officer-in-Charge for Fintech Sub-Sector Vicente T. De Villa III, discussed how recent technological trends and developments are affecting the financial landscape.


According to Mr. Das who opened the session, key technologies, such as natural language processing, augmented reality, virtual reality and cognitive computing, are shaping the financial industry by bringing an array of innovation opportunities. These include personalized virtual banker, augmented banking, biometric mobile wallet and virtual branch, among others.

Shivaji Das, managing director and partner of Frost & Sullivan Asia Pacific

Considering the various benefits of technology, he said that traditional banks and financial institutions have given importance to digital transformation in recent years.

The J.P. Morgan Chase & Co., an American multinational investment bank and financial services company, for instance, has invested a lot in financial technology (fintech). The firm allocated more than $11.5 billion for its technology spending in 2018 and devoted $3 billion to technology innovation in machine learning and robotics, among others.

The approach of exploring and integrating technologies in their businesses has helped traditional banks improve their performance in finance, customer service innovation, business innovation, and efficiency and employee capacity, Mr. Das said.

Having a population with a median age of 24 (which comprised of a segment considered as the most digital native) and a double digit growth in Internet access and smartphone penetration, Mr. Santiago believes that the Philippines is now ready for digital shift. The biggest opportunity, among others, he said, is that 95% of transactions in the country are still done via cash and cheque.

Noel A. Santiago, chief digital officer, Bank of the Philippine Islands

“This is very right for digitalization. The country is ready, the population is ready,” Mr. Santiago said, noting that banks must continue to innovate then. “It is a business imperative for banks all over the world, especially in emerging market that the pace and promise of innovation are being fulfilled. Banks must do more to keep up or they will left behind,” he said.

Many banks, however, are not innovating as fast as they should be to remain competitive, said Mr. Santiago. Citing a survey conducted by Inclusive Digital Finance, he shared that 80% of thrift, rural and cooperative banks as well as microfinance firms in the country are not ready to embrace digital technology.

To help banks with their digital transformation journey, Mr. Santiago said that they need to capitalize on infrastructure and delayer with technology, while fortifying their security. Banks should also prepare for open banking, adapt a mobile-first and innovation mind-sets, and consider customer experience as one of their top priorities.

“We really have to put digitalization as part of our imperative,” Mr. Santiago said, noting that such transformation will reduce the cost of banks and will therefore permit a much higher level of engagement to segments who need access to financial services.

Aside from bringing profound changes on how financial services are being offered, the waves of digital innovations have also influenced how consumers complete their payment transactions, giving way to a cash-lite society.

Lito M. Villanueva, founding chairman of

Mr. Villanueva said that digital trends shaping the future of money are already being observed. One of which is the decreasing usage of cash. China, for example, has recorded a staggering mobile transaction volume of about $41.5 trillion in 2018. Meanwhile, in Sweden, only one in 10 consumers paid for something in cash.

Other trends cited by Mr. Villanueva include growing smartphone ubiquity; increasing disintermediation; and accelerating usage of distributed ledger technology, a consensus of replicated, shared and synchronized digital data geographically spread across multiple sites, countries or institutions.

A cash-lite economy has several benefits, said Mr. Villanueva. It promotes transparency, cultivates cost and process efficiencies, generates more data, provides convenience, and levels the playing field.

“Providing a delightful customer experience will always be the end-goal of any digital initiatives,” Mr. Villanueva explained. “As we often hear, technology is the best equalizer, especially driving financial inclusivity.”

However, technology alone is not enough to reach and cater to the unbanked and underserved Filipinos. Mr. Villanueva said that it also requires a concerted efforts from different sectors.

“Collaboration and synergy are critical to the success of this objective. This challenge is too enormous, too important for any single player to take on their own. Let’s put all our hands on deck. The more united we are, the swifter we create a digital economy that uplifts the lives of every Filipino,” Mr. Villanueva said.


Playing its crucial role in creating an enabling environment alongside emerging technologies, the BSP, according to Mr. De Villa, has launched several initiatives aimed at allowing industry players to take full advantage of innovations without compromising consumer protection, security and financial stability.

Vicente T. De Villa III, senior director and officer-in-charge for Fintech Sub-Sector, Bangko Sentral ng Pilipinas

“We always endeavor to provide an environment that encourages financial innovation. We want to see the development of new and innovative financial services that can help advance inclusive growth and deliver more efficient financial services to the general public,” Mr. De Villa said. “We seek to continually build a regulatory environment that allows innovations to flourish yet still mindful that risks must be effectively managed and consumer welfare remains protected.”

In this case, Mr. De Villa said that BSP ensures proportionality in the practice of supervision, maintains multi-stakeholder collaboration, and guarantees that innovations always work for the benefits of the consumers.

Among others, the BSP espouses a flexible “test-and-learn” approach to financial innovation that provides an opportunity for innovators to participate in the financial system as players in their own right or as partners of more traditional players like banks. The central bank also launched the National Retail Payment System, a policy and regulatory framework that aims to establish a safe, efficient, reliable, affordable and inclusive retail payment systems in the country.

“We strive to maintain a forward looking approach to ensure that regulatory and supervisory frameworks are in tune with the emerging trends and developments. We continue to improve our capabilities for more proactive surveillance and monitoring of market so we can readily adjust to future challenges and opportunities ahead,” Mr. De Villa said. “We endeavor to promote financial innovation, while, at the same time, establishing adequate safeguards to manage relevant risks.”

Looking at the future, Mr. Das said that banking will evolve to leverage technology in ways that will have a much deeper implication to customer service than current use cases. By 2030, he sees that the banking service provider landscape will consist of different types of firms who, in order to remain competitive, will attempt to leverage certain advantages that are difficult for others to replicate.