TRADITIONAL Philippine banks must modernize their operations to keep up with the increasing digitalization of the sector, an official of a financial technology (fintech) company said on Tuesday.
“They (banks) need to do it yesterday. But it is a journey. If they do not start now … other fintechs will be able to provide services that they are not able to provide,” Finastra Technology, Inc. Managing Director for Asia-Pacific Payments Tal Weiser said in a briefing.
Headquartered in London, Finastra provides financial software solutions and systems for retail and wholesale banking, treasury and capital markets, and risk management. It has been operating in the Philippines for 30 years.
Mr. Weiser said fintech companies are more customer-centric, accessible, and offer specialized services than traditional banks. They do not use the legacy systems traditional banks use, which he said which are decades old, mainframe-based platforms.
To modernize their operations and increase efficiency, banks should consider collaborating with fintech companies, especially those offering cashless payments like e-wallet apps GCash or Maya, Mr. Weiser said.
“If banks want to protect their revenues, they will need to invest in payment modernization instead of competing with fintechs. They need to collaborate,” he said.
“I think every bank, which is in a different stage of their modernization program, has to carefully re-evaluate their payments modernization strategy. What kind of service are they serving? What customers are they serving? What do they want to achieve from their payments business? Most banks are using the legacy system for payments, so they have to look at how to modernize their program,” Dheeraj Joshi, Finastra Asia-Pacific regional head for payments solutions consulting, said in the same briefing.
Mr. Weiser said the industry is making progress, with some banks already shifting to cloud systems.
“The industry now is investing a lot in order to be more efficient. All the banks need to invest now … due to the competition. There is a transition in the way we do business,” he added.
The Finastra officials also noted how the country’s banking regulator, the Bangko Sentral ng Pilipinas (BSP), is working towards improving the payment system infrastructure in the country amid increasing digitalization.
The BSP wants to digitize at least 50% of the volume and value of total retail payments by 2023 as part of its financial inclusion efforts.
Online payments made up 30.3% of the total volume of retail transactions in 2021, and the value of payments done online represented 44.1% of total transactions last year. — A.M.C. Sy