Ayala-led Bank of the Philippine Islands (BPI) will spend P10-11 billion this year as information technology (IT) and cybersecurity investments, more than it has been paying for digitalization in the last five years.
The big bank’s newly-minted president and CEO, Jose Teodoro “TG” Limcaoco, a homegrown Ayala Group executive and self-confessed digital “geek”, said he will allot more budget to the digitalization of BPI under his watch, but will not formally apply for a digital bank license from the central bank.
“In general our spending has been about eight percent of revenues on IT and cybersecurity, and I wouldn’t mind taking it higher because I think we have a great opportunity to expand our leadership in digital banking,” Limcaoco said in a virtual media briefing following BPI’s annual stockholders meeting where the bank announced a first-quarter net income of P5 billion.
“However, we need to balance that against the realities of the economy and the profitability of the bank. It’s a plan that we are working on now that I need to take to the board (of directors), but certainly if there is anything that we must do, we must focus on digital spending but prudently, and doing it efficiently.”
Since 2015, BPI’s IT and cybersecurity budget is the equivalent of 6-8 percent of its total revenues, or about P5 billion to P7 billion a year which was already on the high side compared with other large lenders.
Limcaoco said focusing on data, technology as well as sustainable or green banking is his top priority as CEO. More than all of this, he said his strong side really lies on the consumer sector and inclusive banking.
“We need applications that are easy to understand, easy to download, easy to use and actually fun to use. That is exactly what we’re trying to do in the future,” he said. “Digitalization allows you to capture a lot more data, and you can be more efficient in giving the right products to your customers cheaply, and better,” he added.
BPI chief finance officer, Maria Theresa Marcial said that the bank’s capital spending has evolved in the last few years with more emphasis on operating expenses rather than capital expenditures.
“Because of the way we handle or the way we pick technology applications, suppliers and so on, we have moved from CAPEX model to OPEX model. What’s more important is to look at allocation to these projects. And in terms of amounts for instance for technology investments for this year, we’re looking at almost 10 percent of revenues. In terms of share to total OPEX, it’s probably around 18 percent,” said Marcial. At the end of 2020, BPI’s total revenues amounted to P101.9 billion while its OPEX stood at P48.1 billion.
In the meantime, Limcaoco said they have no plans of applying for a separate digital bank license from the Bangko Sentral ng Pilipinas (BSP). The BSP issued its circular on the establishment of digital banks last November 2020.
“You need to understand exactly what is a digital bank — it’s a bank that tries to perform all its services purely digitally and it will not have the legacy of branches and physical infrastructure. To that end, they have an advantage because they don’t have legacy costs or legacy assets,” said Limcaoco.
“(But) do we intend to put up a digital bank? The quick answer is really no, because we are already a digital bank,” he added.
Limcaoco said BPI is a digital bank with assets that are tangible in their extensive branch network, and they also have intangible assets such as its 170-year old reputation as a Philippine bank that financial consumers and bank customers are looking for.
“If you think about your wealth today, your wealth today is in two forms: it’s the cash in your pocket and the data in some bank or some wallet. That’s it. That’s all your wealth, it’s the cash in your pocket (such as) the bills or the coins, but the rest of your wealth is in data form,” said Limcaoco. “The choice of consumers is where do you keep that data, to safekeep it, to guard it, and to make sure you have access to it and that you can use it when needed and what is the cost of keeping that data with (your bank).”
Limcaoco is confident that BPI, even without a formal digital bank license, will emerge as top player in this segment. “The successful banks are the ones with the name that people can trust,” he said.
“People love the concept of digital banks. There will be people who will come to the Philippines trying to set up a digital bank but they will always be at a disadvantage to BPI which has a name and a physical infrastructure to attract customers,” he added.
As of end-2020, BPI has 8.4 million clients and 2.7 million unique active users of BPI Online and its mobile app. It also has one of the highest branch network of 1,173.