MANILA — Traditional lenders and fintech startups in the Philippines are competing for a foothold in the emerging digital banking industry propelled by the spread of smartphones.
Leading bank Rizal Commercial Banking Corp. (RCBC) prides itself on being “the most digital bank” in the Philippines that offers a wide range of digital financial services, President and CEO Eugene Acevedo told Nikkei in an interview.
RCBC’s consumer finance app DiskarTech has garnered more than 5 million downloads. The platform makes use of roughly 50 internally developed artificial intelligence models to assist with credit checks and fraud detection.
“I think we are the leading bank in artificial intelligence,” said Acevedo. “That is why much of our decisions are made or are based on AI and data science. We don’t guess. There’s enough data that we can model that allows us to do all these things.”
Japanese megabank Sumitomo Mitsui Financial Group (SMFG) bought a stake in RCBC in 2021. Back home, SMFG offers the Olive all-in-one card and app that combines the functions of a bank account, credit payments and other financial services. RCBC plans to make use of SMFG’s know-how in this area.
In the Philippines, 46% of people 15 and older had financial accounts in 2021, according to World Bank data, up 14 points from 2017, but still below Thailand’s 94% and Malaysia’s 88%.
In other words, these numbers indicate high growth potential in the Philippines. The country’s average age is relatively young at around 25, and the middle class is expected to expand for the foreseeable future.
The Philippines is also among the top countries in terms of time spent connected to the internet due to the spread of smartphones, providing fertile ground for the growth of digital banking.
The Philippine central bank has been promoting digital banking and electronic payments as part of a campaign to make financial services more secure and accessible. In 2021, it awarded digital banking licenses to six lenders, including startup GoTyme Bank. Because there is no need to open bank branches, license holders are able to expand their businesses speedily.
GoTyme Bank is a joint venture between Philippine conglomerate Gokongwei Group and South Africa’s Tyme banking platform. GoTyme Bank started operations in October of 2022.
At a GoTyme Bank self-serve kiosk, a customer can open an account and receive a cash card in five minutes — a process that usually takes a week or more at a traditional physical bank branch.
GoTyme Bank projects 5 million users next year, a number approaching the download count for RCBC’s app. GoTyme plans to branch out into insurance, investments and other financial services as well, said President & CEO Nathaniel Clarke.
Though the industry has moved forward in digital banking with the adoption of digital payments by e-wallets, “there has not been a lot of progress in the realm of credit, insurance, and investments,” said Clarke. “So eventually, we’re trying to solve this.”
Competition is fierce in the Philippine digital finance industry. The biggest traditional lender, BDO Unibank, is eager to expand its presence. GCash and Maya are two digital wallets affiliated with telecom groups. Each boasts tens of millions of users, and Maya won a digital banking license as well.
Up-and-coming digital banks are now at the stage of making upfront investments to capture customers. GoTyme Bank is offering a 5% annual interest on savings, which is higher than traditional banks.
A report by Fitch Ratings released Monday noted the rapid growth of upstart digital banks in the Philippines. “We expect digital banks will continue to compete aggressively for deposits over the next two years,” it said.
But the agency also argued that the newcomers’ reliance on high deposit rates to draw customers is unlikely to be sustainable, and sees traditional banks maintaining their hold on the sector.