The thrift banking sector digital transformations is steadily gaining traction in different phases depending on the size of the bank, despite numerous challenges such as cybersecurity and other tech-related transition issues.

Chamber of Thrift Banks (CTB) President Cecilio San Pedro remains confident though, that the country’s 43 thrift banks are facing head-on the complexity of the digital transition. These include cybersecurity, heightened competition from fintech or financial technology firms, the ever-increasing regulatory requirements from the Bangko Sentral ng Pilipinas (BSP), and the need to foster internet literacy.

“Our member-banks (CTB) are poised for a range of growth opportunities. These prospects include the ongoing digital transformation in banking,” said San Pedro on Wednesday, Sept. 6. He is also the president and CEO of Sterling Bank of Asia, the sixth largest thrift bank in the country.

San Pedro also urged all thrift banks to improve digital infrastructure, develop user-friendly mobile apps, and implement innovative solutions. “Favorable regulatory changes can fuel innovation, while a strong commitment to data security and privacy will bolster customer trust,” he said.

He also stressed that smaller banks can offer more products designed for small and medium-sized enterprises (SMEs), sustainable finance and to “champion financial inclusion by designing accessible products for marginalized populations.”

San Pedro even said that expanding operations outside of the Philippines is possible for any member of the CTB.

All of these concerns and issues will be tackled when the group meets for its annual national convention on Sept. 22, which will focus on discussions of economic recovery through digitalization, and how it will impact on thrift banks.

Based on the latest BSP survey on banks which include thrift banks, the question on digitalization and sustainable lending is highlighted as bank presidents and other top executives are asked about their respective banks’ plans and progress.

Basically, the survey cover six sections including growth outlook, business strategy, risk assessment, impact of regulations, and the digitalization and cybersecurity preparedness.

The BSP said digitalization of products and services is still identified as a top strategic priority.

The BSP said about 51.9 percent of surveyed banks said they are right on schedule in their digitalization efforts while only 1.9 percent of banks said they are ahead of schedule. Another 38.9 percent of banks are still in the planning stage in digitizing products and services. Mostly it is the big banks that are more advanced in their digital transformation process.

Meanwhile, 47.5 percent of surveyed banks said they were “prepared” to “handle and manage” cyberthreats. 

More than 50 percent of the big banks and thrift banks said they can deal with cyber-related attacks. About 31.7 percent said they are worried about the financial losses that result from cyber crimes, followed by data breaches and hits to banks’ reputations.

After digitalization and readiness to counter cyber attacks, another challenge for banks is sustainable finance and how to grow this.

About 81.1 percent of big banks, 69.7 percent of thrift banks, 63.2 percent of rural and cooperative banks and 100 percent of digital banks considered sustainable financing as highly important.

The CTB noted Wednesday that thrift banks have showed “remarkable stability and growth” in the past years and early on in 2023.

“The past year has been marked by a positive trajectory in the thrift banking sector's performance. Despite external challenges, the industry has managed to not only maintain its stability but also achieve substantial growth across various crucial metrics,” said San Pedro.

Thrift banks’ total assets stood at P950 billion as of end-June this year, boosted by deposit mobilization.

Its lending increased 14.6 percent to P616 billion as of end-May. San Pedro said this was due to “operational niches” which include SMEs, housing, and consumers.

The sector has soured loans of 7.19 percent, “reflecting the thrift banks' proactive approach to risk management and asset quality,” said CTB. Meanwhile, its capital adequacy ratio stood at 19.17 percent as of end-2022, above-minimum of the 10 percent required by the BSP.

As of end-March this year, Metrobank subsidiary Philippine Savings Bank with assets of P254.29 billion is the country’s biggest thrift bank, followed by Philippine Business Bank with P135.63 billion and China Bank Savings Bank of China Banking Corp. with P132.68 billion.

The other seven banks in the top 10 in terms of asset size are: City Savings Bank, Bank of Makati, Sterling Bank, Producers Savings Bank Corp., BPI Direct BanKo Inc., First Consolidated Bank and UCBP Savings Bank.