Digital Frontiers talks about securing the growth of financial ecosystem

Published August 4, 2021, 9:25 AM

by Jonathan Castillo

Digital Frontiers

While the Philippines is behind the other surveyed countries of Southeast Asia in its progress towards becoming a cashless society, the country’s financial services industry is still poised for growth with a secure digital foundation as more Filipino consumers have started embracing digital financial services in the last year, according to VMware, Inc. (NYSE: VMW). The VMware Digital Frontiers 3.0 Study found that when it comes to the embrace of contactless payment – a measure of digital banking penetration – 76% of Filipinos surveyed are open to idea, as compared to consumers in Singapore (88%), Malaysia (87%), Indonesia (90%) and Thailand (85%). However, more Filipinos are now engaging with financial services firms digitally, with more than half (55%) of respondents now preferring to engage with their banks via apps rather than visiting in-person at a branch.

Financial services organizations need to prepare for the new customer battleground that is now moving online. According to the same study, while 59% of Filipino respondents felt that financial services firms delivered better digital experiences last year compared to healthcare, government and education organizations (but slightly behind retail at 60%), at least a quarter (25%) still feel that financial services firms have failed to adapt to the changing market. This has critical implications for financial services firms that are transforming into digital banks as 64% of Filipino respondents are prepared to switch brands if digital experiences do not live up to expectations.

As financial services organizations accelerate their innovation efforts to drive digital banking adoption and gain a competitive edge, it is vital to recognize the core fundamentals that shape great digital experiences for Filipinos: a high level of security and protection of consumer data (63%), faster speed of service (52%), ease-of-use across all devices (36%) and applications that deliver services simply and effectively (36%).

“Digital-first financial services firms have a huge opportunity in the Philippines as the pandemic last year has significantly changed the way Filipinos engage with brands digitally. Many financial services organizations are already gearing up for transformation into digital banks as our central bank prepares to issue licenses to expand digital financial services. However, to ensure successful industry transformation, it is critical to build a robust and trusted digital foundation that is able to deliver personalized, seamless, and secure experiences to Filipinos,” said Walter So, Country Manager, VMware Philippines. “Beyond accelerating innovations and driving competitive advantages for digital banks, harnessing frontier technologies such as Cloud, facial recognition and 5G can also help reduce barriers that hinder financial access and close the financial inclusion gap in the Philippines.”

The future of finance is virtual in the Philippines

Over the last year, consumers in the Philippines have gained a better appreciation of the value of digital products and services, with 62% of respondents stating that digital engagements with financial services organizations have freed up their time to focus on other priorities. Consumers are also embracing emerging technologies more, with 75% of respondents expressing trust in artificial intelligence and more than one-third (36%) willing to let an app help make their investment decisions over an individual that works for the bank.

In a sign that digital engagement models will become the norm for the country’s financial ecosystem as the Philippines looks to improve its internet penetration, the study also found that Filipino consumers are relying on their smart devices more, with 63% of respondents stating that their phones are now more important than their wallets when conducting financial transactions.

Technologies of the future show promise, but security and trust are still foremost concerns

Consumers in the Philippines are showing willingness to embrace next-generation technologies with 78% of those surveyed expressing trust in facial recognition technologies. In particular, Filipinos respondents are the most trusting of 5G (85%) as compared to other Southeast Asian consumers (average of 78%). They are also the most optimistic about the impact to their digital experiences, with 46% of those surveyed believing that 5G can make banks more efficient – for example, processing applications and credit checks faster. This is comparable with other surveyed countries in Southeast Asia: Singapore (38%), Malaysia (40%), Indonesia (35%) and Thailand (44%).

Despite the optimism in emerging technologies, Filipino consumers will not compromise when it comes to security, with 83% of those surveyed considering security as the number one priority when choosing a financial services provider. Furthermore, more than half (56%) of respondents feel paranoid that organizations are tracking and recording what they are doing on their devices. The implication is clear for financial services organizations: deliver not only cutting-edge innovations, but also secure and privacy-focused digital experiences to win the trust of consumers in the Philippines.

Growing demands for an ethical and inclusive financial ecosystem

While the Philippines’ digital pivot has yielded remarkable results with 77% of respondents defining themselves as “digitally curious” or “digital explorers,” consumers are increasingly focused on more than just digital experiences when choosing their financial service providers. 61% of respondents stated that they will stop engaging with organizations that do not publicly share their ethical policies – at par with Thailand and the highest amongst its Southeast Asian counterparts including Singapore (41%), Malaysia (54%) and Indonesia (59%). Despite having the lowest banking penetration in Southeast Asia, 85% of Filipino respondents remain positive and are expecting technology to advance financial inclusion within the next decade.

“The digital transformation that UnionBank started six years ago has prepared us for the biggest disruption that the whole world is facing today. Our transformation has set our digital banking technology in place, paving the way for us to continue serving the public’s banking needs despite the limitations of these uncertain times. We were able to boost our mobile and web banking platforms to enable clients to safely do their banking needs from home during this pandemic,” said Henry R. Aguda, Senior Executive Vice President and Chief Technology and Operations Officer, Union Bank of the Philippines. “The most valuable thing that this pandemic has taught us is the value of people coming together. In order to weather this crisis, we have to cultivate a culture of learning and never fearing the unknown because that is where we will find opportunities to invent, innovate and discover.”

Technology key to accelerating economic growth and recovery

Progressing into 2021, VMware outlines key priorities that will further strengthen the transformation of the Philippines’ innovation-led financial ecosystem:

  • Empowering financial services organizations to build a multi-cloud and app future: Unlocking multi-cloud future with app-driven innovations in a consistent and more secure environment that enables continuous innovation
  • Enabling innovation and productivity for a distributed workforce: Future ready workforce solutions will enable a seamless and more secure digital employee experience, driving greater outcomes in the new world of work
  • Intrinsic security for uninterrupted innovation: An intrinsic approach to enterprise security will provide an additional layer of robust protection for mission-critical operations and infrastructures to fast-track business innovation and resilience.
 
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