The majority of financial institutions in the Philippines have “minimal” digital transformation (DX) capacity, a FINTQnologies Corp survey showed. published Thursday.
Eighty percent of the nation’s financial institutions are either “followers of the pack” or “laggards” when it comes to digital transformation, said FINTQ, the financial technology arm of Voyager Innovations Inc ..
The survey interviewed 76 CEOs of financial institutions that are members of the Chamber of Savings Banks (CTB), the Rural Bankers Association of the Philippines (RBAP) and the Microfinance Council of the Philippines (MCPI).
The results were merged with the “Inclusive Digital Finance 2018” report officially launched on Thursday at Bangko Sentral ng Pilipinas (BSP) headquarters in Manila.
FINTQ examined the readiness of financial institutions to undertake digital transformation using the Engagement, Awareness, Readiness and Adaptability (CARA) framework.
Each financial institution was rated from 0 to 100. They were then grouped into three archetypes: pioneers (score 61 and above), pack followers (between 41 and 60) and digital laggards (under 41).
“The average financial institution at this point shows minimal capacity for digital transformation. About 80 percent of respondents score 61 and below on the perfect score of 100, ”the study showed.
FINTQ Managing Director Lito Villanueva said most financial institutions need to invest in upgrading their current systems to make sure they’re DX ready.
“A one-size-fits-all approach will never work. We know that digital latecomers require the most fundamental technologies before undergoing a full DX. This means that many of them need to upgrade their connectivity, modernize their existing systems, hire digital savvy talent and take an agile approach in executing their plans, ”he said.
“Pack followers need to harness big data to make informed decisions while adjusting policies and improving the customer experience. With the right support, trailblazers could delve into core DX functions such as omnichannel delivery or open banking, ”he added.
Only 14 of the respondents were found to be “highly ready” for the digital transformation. Four — two savings banks, a cooperative, and a rural bank — were found to be “largely ready” to go digital with scores of 81 and above. The four have not been identified.
Among the issues disrupting digital transformation is the lag in the effectiveness of central bank regulations that are not immediately available for implementation.
“The results indicate that the entire industry is experiencing the usual political lag where the effects of regulations are felt over the following years as financial institutions take the time to reconfigure their businesses and operations with current regulatory requirements,” notes the report.
“However, given BSP’s goal of increasing the share of electronic payments to 20% by 2020, policies require a more active push on the ground where key stakeholders such as government and development partners should “lead” financial institutions to take on their journey of transformation, “he added.
FINTQ and other financial institutions have launched the On the Road to 20 by 2020 campaign, which aims to prepare the industry for digital disruption.
“The biggest barrier to their adoption is their willingness to invest in digital technologies. This has profound consequences because, as our report shows, the ‘readiness quotient’ strongly influences the level of the bank’s ‘commitment quotient’ to bring its activities towards a digital economy, ”Villanueva said.
The BSP has started to modernize banking transactions in the country, in line with its goal of digitizing 20% of all transactions by 2020.
“The Bangko Sentral ng Pilipinas champions the cause of financial inclusion and the use of digital technology by creating an enabling environment and a vibrant digital financial ecosystem,” Deputy Governor Maria Almasara said on Thursday. Cyd Tuaño-Amador during the Digital Transformation Acceleration Program. .
“Other PASB initiatives include modernizing the country’s payment flows through the National Retail Payment System (NRPS),” she said.
Through NRPS, BSP launched InstaPay and the Electronic Funds Transfer (EFT) payment system, allowing individuals to transfer funds between banks in real time.
He also launched PESONet, which allows government, private companies and individuals to initiate recurring payments from accounts held in financial institutions supervised by BSP (BSFI) to corresponding accounts in other BSFI.
“We now have two multilateral automated clearinghouses that enable Filipinos to enjoy secure, affordable and user-friendly retail payment systems,” Amador said.
She noted that PASB has also created a Digitization Steering Committee to “guide and coordinate” efforts to move to electronic platforms.
“This will allow us to reap the cost savings and efficiency of digitization, and keep up with the rapidly changing environment as well as put in place proactive principles of monitoring and oversight,” she said. declared.
The challenge for us is to come up with policies, instruments and programs to put fintech innovations in the hands of more people so that they are empowered, ”said Amado. —VDS, GMA News