Working together to accelerate the digital transformation of financial institutions for inclusion.
Photo shows Road to 20 by 2020 stakeholders with their copies of the third volume of the IDF Report. From left to right (Rural Bankers Association of the Philippines NCR Treasurer Edgardo Valenzuela, Jr.; BSP Monetary Board Member Juan de Zuñiga, Jr.; BSP Deputy Governor Chuchi Fonacier; BSP Deputy Governor Dr. Maria Almasara Cyd Tuaño-Amador; FINTQ Managing Director Lito Villanueva; BSP Monetary Board Member Antonio Abacan, Jr.; Microfinance Council of the Philippines President and CEO Fr. Jose Victor Lobrigo; Chamber of Thrift Banks Executive Director Suzanne Felix; and, Chamber of Thrift Banks Trustee Rommel Latinazo.
Multi-stakeholder Commitment to accelerate the digital transformation of financial institutions for inclusion.
Photo shows representatives of Road to 20 by 2020 participating stakeholders. From left to right: Microfinance Council of the Philippines President and CEO Fr. Jose Victor Lobrigo; Rural Bankers Association of the Philippines President Armando Bonifacio; Chamber of Thrift Banks Trustee Rommel Latinazo; Chamber of Thrift Banks Executive Director Suzanne Felix; FINTQ Managing Director Lito Villanueva; and, BSP OIC of the Financial Technology Sub-sector Vicente de Villa III.
FINTQ, BSP launch Road to 20 by 2020 campaign and digital accelerator program for financial institutions
In a bid to accelerate the digital transformation of financial institutions, FINTQnologies Corp. (FINTQ), together with the Bangko Sentral ng Pilipinas (BSP), Chamber of Thrift Banks (CTB), Rural Bankers Association of the Philippines (RBAP), and the Microfinance Council of the Philippines (MCPI), launched today the Road to 20 by 2020 campaign.
Road to 20 by 2020 is a multi-stakeholder campaign aimed to prepare financial institutions for their own digital disruption through the Digital Transformation Accelerator Program (DTAP). The campaign, launched at the BSP Headquarters, targets to assimilate 20% of financial institutions to PESONet and InstaPay; leapfrog digital financial transactions to 20% from 1%; reduce unbanked LGUs to 20% from 35%; and ultimately, bring 20 million unbanked and underserved Filipinos to formal financial system – all by the end of 2020.
Meanwhile, DTAP, under the Road to 20 by 2020 campaign, seeks to assist and enable financial institutions with both the solution and the strategy or change management they would need, which includes a roadmap to leapfrog and truly go digital.
FINTQ, along with its private institution partners in the program, is holding a series of implementation workshops across different sectors of the financial industry–geared mostly towards rural, thrift banks, cooperatives, and microfinance institutions.
“To expand access to financial services throughout the country, we need to focus on enabling banks and financial institutions that require massive modernization of their legacy systems. That is why we launched the Road to 20 by 2020 campaign to roll out initiatives aimed to bridge the digital gap faced by most financial institutions,” said FINTQ Managing Director Lito Villanueva.
“What sets the Road to 20 by 2020 campaign from all the digital transformation initiatives is that this is geared towards financial institutions—providers of financial services at the grassroots. Realizing inclusive digital finance is not just about the consumers but also preparing the institutions that provide those financial services,” Villanueva said.
For his part, BSP Governor Nestor Espenilla Jr. in his message printed at the latest issue of the Inclusive Digital Report (IDF) said: “At the BSP, we recognize the potential of new digital technologies. We are keenly aware that financial institutions that leverage on technology are granted greater opportunities to diversify. Technology use allows them to widen the products and services offered. We note that technological change is exponential, allowing the emergence of an even greater variety of services. We anticipate that with greater use, needs of financial consumers evolve and become more sophisticated.”
In the same event, FINTQ launched the third volume of the Inclusive Digital Finance (IDF) Report, titled: Are Philippine Financial Institutions Ready for DX? A Baseline Study, which introduced the CARA (Commitment, Awareness, Readiness, Adaptability) Index, a digital transformation (DX) framework aimed to evaluate the digital readiness of local financial institutions. It likewise paints the digital transformation of thrift banks, rural banks, microfinance institutions, and cooperatives in its infancy.
Not quite DX-ready
Based on the FINTQ IDF Report Vol. 3, the dominant picture that emerged from the findings shows that 80% of the financial institution respondents show “limited” or “minimal” capacity to digitalize their systems and processes – a challenging pattern that could impact the progress in expanding access to financial services to the 77% of Filipino adults who are presently unbanked.
This means that a typical respondent lacks a concrete DX roadmap and does not operate an e-banking platform. The average financial institution remains undecided in migrating to a new core banking system nor has not made thorough research on what solutions best fit their needs.
The report shows that 57% of the respondents are so-called “digital laggards” who show limited or scant capacity at this point, scoring 40 and below out of the perfect 100 in FINTQ’s CARA Index. About 24% are “pack followers” who scored 41 and 60, translating to “minimal” capacity for DX. Only 18% of the respondents scored 61 and above, thus making them “path breakers” who show extensive or substantial readiness.
“The biggest barrier to their adoption is their willingness to invest in digital technologies. This has profound consequences because as our report shows, the ‘readiness quotient’ heavily influences the bank’s level of ‘commitment quotient’ to bring its business towards a digital economy,” said Villanueva.
Basic banking platforms first
One of the survey findings uncovered in the report is that when financial institutions go digital, they would like their e-banking platforms to perform basic needs rather than go on with trendy, buzzword technologies.
The report shows that 91% of the respondents want bills payment as one of the e-banking functionalities, while 88% say their platforms should be able to do digital payments. Moreover, 75% of respondents want to have a loans management system and 63% see the need for loans origination system. Meanwhile, 9% want blockchain, 8% are interested in machine learning, 5% want to go for open API and 4% are open to cryptocurrency.
“Digital laggards and pack followers prioritize the basic electronic banking products and service requirements of their customers should they undertake their digital transformation,” said Villanueva.
‘Shepherd’ financial institutions to start their journey
To shepherd financial institutions towards accelerating their DX journey, industry associations, solution providers, enterprises, private organizations, regulators, and government institutions need to work on relevant and responsive programs encompassing people, process, platform and policy.
“A one-size-fits-all approach is never going to work. We know that digital laggards require the most foundational technologies before undergoing full DX — this means many of them need to upgrade their connectivity, modernize their legacy systems, hire digital-savvy talents, and adopt an agile approach in executing their plans,” said Villanueva.
“Pack followers need to exploit big data to arrive at informed decisions while at the same time, adjusting their policies and improving customer experience. With the right support, path breakers could delve into the core functions of DX such as omnichannel delivery or open banking,” he added.
Among the recommendations of the study include establishing a commitment-based or match funding program for financing, driving adoption of the National Retail Payment System through technology solutions, coming up with shared and managed services for economies of scale, and corresponding progressive regulation attuned with digital inclusive finance.
About the Road to 20 by 2020 campaign
It is a multi-stakeholder campaign that seeks to fill the gap and prepare financial institutions for their own digital disruption through the Digital Transformation Accelerator Program
About the Digital Transformation Accelerator Program (DTAP)
DTAP aims to bridge the digital gap currently faced by most financial institutions. The program will cover a number of critical areas the FI/bank will need to prepare as prerequisites in their digital transformation. This initiative is part of the KasamaKA grassroots-based national movement for financial inclusion earlier adopted by the League of Provinces, League of Municipalities and Liga ng mga Barangay.
The program seeks to assist and enable financial institutions with both the solution and the strategy/change management they would need – the Roadmap to leapfrog and truly go digital. There will be a series of workshops across different sectors of the banking/financial industry–geared mostly towards rural and thrift banks, and micro-finance institutions—that will be done in a “consultative approach” to achieve the FI’s transformation.
About the Inclusive Digital Finance Report: Are Philippine Financial Institutions Ready for DX? A Baseline Study
Inclusive Digital Finance Report measures, for the first time, the digital readiness of local financial institutions. This covers thrift banks, rural banks, microfinance institutions, and cooperatives. In the report, FINTQ built a digital transformation framework aimed at assessing the Commitment, Awareness, Readiness, and Adaptability (CARA) quotients of individual institutions. The framework essentially looks at the capacity of institutions to design solutions that are relevant to their customers.
- Online Survey Period: August 23 to September 25, 2018
- 76 Chief executives and/or presidents of the member financial institutions of the Chamber of Thrift Banks (CTB), Rural Bankers Association of the Philippines (RBAP), and the Microfinance Council of the Philippines (MCPI).
- The FIs that responded to the survey are from 16 out of the 18 regions in the country.
FINTQnologies Corp. (FINTQ) is the financial technology arm of Voyager Innovations. It focuses on building a massive, inclusive, and sustainable bottom-up ecosystem via execution of customer-centric, demand-driven, high impact, and socially relevant digital finance accelerators. It builds pioneering digital solutions and technologies to drive universal access to finance in growth and emerging markets.
FINTQ was awarded the Outstanding Financial Inclusion Partner by the BSP for its active role and impact in promoting inclusive digital finance with its pioneering initiatives such as its digital lending platform Lendr which is now regarded as the largest with the most extensive digital footprint covering all 81 provinces. It has disbursed almost Php40 billion in loans as of end-September 2018 from partner financial institutions through its platform since its launch in January 2015. It has also launched KasamaKA, its grassroots-based national movement for financial inclusion adopted by the League of Provinces, Leagues of Municipalities and Liga ng mga Barangay. It was also commended by the Philippine Senate as an enabling initiative towards digitalizing the economy.
About Voyager Innovations
Voyager Innovations is the leading technology company in the Philippines focused on developing customer-centric emerging market platforms in the areas of digital payments, digital finance, and marketing technologies. For more information, visit www.voyagerinnovation.com.