New offerings seen from Philippine banks amid Covid-19

The Philippines is experiencing a boom in digital banking as a result of the Covid-19 pandemic, with several digital-only banks announcing plans to enter the market and legacy banks rapidly upgrading their online offerings. East-West Banking Corporation, the country’s 11th-largest bank by assets, launched its own fully digital bank, Komo, in the third quarter of 2020. Furthermore, the state-owned Overseas Filipino Bank (OFB) became fully operational as a digital bank in June 2020. A subsidiary of the Land Bank of the Philippines, the OFB is intended to provide an array of financial and investment services to Filipino nationals residing overseas. Meanwhile, the country’s main lenders in terms of assets and branch networks have all been recalibrating operations towards digital services as a result of quarantine restrictions. Enhanced Community Quarantine (ECQ) was imposed on the most populous island of Luzon in March 2020, with other areas of the country quickly following. ECQ was finally eased to General Community Quarantine (GCQ) in Manila in June 2020, allowing residents to move more freely around the different areas of the capital, albeit with transport limitations, social-distancing restrictions and a night-time curfew still in place. Banks were allowed to operate branches during the ECQ period with reduced hours and strict health protocols, with many scaling back brick-and-mortar operations to ensure customer and staff safety, and to respond to shifting demand.

Online Migration

The move away from physical banking services during the pandemic is demonstrated by figures from the Bangko Sentral ng Pilipinas (BSP), the central bank. In mid-May the BSP reported that the volume of ATM transactions in Luzon had declined by 25% since the onset of ECQ, while the value decreased by 30%. Concurrently, there has been a spike in transactions using e-payment services such as InstaPay and PESON et. A report by Philippine Payments Management Inc (PPMI) revealed that 8.8m InstaPay fund transfers were processed in April, representing an increase of 2.2m, or 32%, over the previous month. From February to March the growth figure was 10%.

InstaPay was launched by the BSP in April 2018 as part of its efforts to raise the share of digital transactions to 20% in 2020. Account holders can transfer up to P50,000 ($994) per day through the system, which is intended to facilitate urgent personal transactions, and is currently offered by 45 financial institutions. PESON et, for its part, is offered by 56 financial institutions and is designed for businesses and government bodies to make efficient high-value transactions.

Digital Acceleration

Although the Philippines’ main banks already had digital transformation strategies prior to the Covid-19 pandemic, many have accelerated their digitalisation efforts. In March 2020 Union Bank reported a 160% increase in daily signups to its online and mobile banking platforms, while new account openings through its Union Bank Online platform were 2700 times higher than in March 2019. Eugene Sering Acevedo, president and CEO of the Rizal Commercial Banking Corporation (RCBC), told OBG that customers using the bank’s mobile app had increased by 10% between mid-March and mid-May. In recognition of the rapid changes taking place in the market, RCBC is now considering closing some underutilised branches while expanding and upgrading the bank’s digital services. “Previously, the thinking was that you needed to open new branches to expand in the Philippines, as it could take five to seven years for this country to truly go digital. Now, with the disruption of Covid-19, the process of digitalisation has already happened and we need to adjust,” Acevedo told OBG, adding that all the management at RCBC are now focused almost exclusively on digital targets and key result areas.

The BSP has also set its sights on more ambitious digital banking targets as a result of Covid-19, with its governor, Benjamin Diokno, telling a virtual fintech forum in May 2020 that the share of digital transactions should reach at least 50% by the end of his term in 2023.