THe oldest bank in the Philippines is ready to embrace technological advancements that financial technologies (fintech) have to offer, amid the cyber-threat issues that plagued the country since the start of the year.
Ramon L. Jocson, executive vice president of the Bank of the Philippine Islands (BPI), told the BusinessMirror they plan to incorporate fintech in their banking ecosystem, alongside the digitization of selected parts of their business.
“Fintech in the financial industry is about the concept that people need convenient banking services but they don’t necessarily need the banks. What they need are efficient banking services,” he said.
This is a bold step for the bank considering that the Philippines has been the focus of the global cybercrime
spotlight with the money-laundering case involving the Bank of Bangladesh and the hacking of the Commission on Elections web site.
Established in 1851, BPI has been the longest-running bank in the Philippines and in Southeast Asia. Jocson heads BPI’s enterprise services group, which serves as the bank’s infrastructure backbone. It covers human resources, centralize, operations, information systems and general administration shared services.
Jocson said some parts of the business will eventually adopt fintech as they digitize, because of the efficiency that technology brings, particularly in reaching out to clients. He believes that financial-technology companies should focus on three things: personalizing the experience, going into analytics to find certain segments that no other company has catered to before and, finally, doubling down on client fulfillment without the extra cost.
“This way they’re able to fulfill something cheaply or they’re able to do something that probably others can’t do and they do it more efficiently,” he said.
Fintech efficiently delivers convenience through online- banking services, according to Jocson, acknowledging “there could be some risks.” However, as banks are under the regulatory ambit of the Bangko Sentral ng Pilipinas, the hazards posed by adopting financial technologies could be neutralized by tight security systems. “The technology that we have, we have the bank core processes, but we know fintech can add value to what we’re doing,” Jocson said.
He said BPI is planning to make it easy to plug fintech into its process with minimum effort. However, the bank will be selective in partnering with fintech companies. BPI has yet to announce concrete plans regarding its choice of financial-technology partner.
Nevertheless, what the bank is doing at present is simultaneously talking to fintech firms, as BPI continues to restructure its banking-system architecture without compromising security in incorporating fintech as part of the bank’s ecosystem.
“Most of these fintech firms have standard technology that most banks are trapped by legacy architecture. So what we need to do is to open our architecture, but, at the same time, not compromising security so that advanced fintech will be part of our value chain,” he said.
Last year the Asian Banker conferred to BPI the Best Mobile Banking in the Philippines award for adopting mobile-device technology to provide banking services. BPI also received the Best Electronic Delivery Channel in the same year during the Bank Marketing Awards, which was coordinated by the Bank Marketing Association of the Philippines
“Well, either way you have to spend on technology, so that’s where the bulk of our capex is spent. About 60 percent of what we spend probably goes to compliance and to security. Probably running the bank itself is probably another 20 percent. So the remainder right now is spent on innovations,” Jocson said.
In 2015 BPI spent over P600 million on security-related technologies. Jocson said the two biggest costs for a bank are compliance and security, which comprise 50 percent to 60 percent of their spending. At present, the bank has no specific spending budget for its ventures on fintech.
“Your cost-to-income ratio shouldn’t soar high enough. There would be hard choices. There will be choices to weigh, you know, prioritize some. The other thing also is that it needs to be balanced with how much you’re spending on people because if you digitize, essentially some parts of your system will be automated. So maybe that means the bank’s level of hiring would be flat,” he said.
The challenge for BPI is to be able to attract clients to move into the platforms that they are about to create, without requiring them to mitigate. “All of those channels will be open, but what we’re trying to do is a migration of the traffic to the new channel.”