Managing the tempo of technology change

MANILA, Philippines — Innovation is vital for businesses to thrive. Whether the goal is operational efficiency gains, improving consumer access or creating entirely new products and services, innovation and better businesses go hand in hand.

At BDO Unibank, innovation is driven by the bank’s focus on customer needs, understanding available technology in developing solutions, while remaining cognizant of the local business landscape.

We believe that the future of financial services will see a coming together of technological efficiency and analytical capabilities with human insight, judgment and relationships. Technology will work in tandem with, not replace, people, bringing the best of both to businesses and consumers.

The rapidly emerging network economy

Today, technology is the cornerstone of the rapidly emerging network economy. As of early this year, internet users in the Philippines grew by 13.4% to 85.1 million. This equates to an additional 10 million plus users.

The 6.6% year-on-year growth of mobile cellular connections, to 168.3 million, is equally impressive, according to "We are Social and Meltwater’s Digital 2023: The Philippines."

With the increased adoption of mobile phones in the Philippines, a corresponding uplift in digital payment acceptance using mobile wallets has been seen. Accepting digital payments reduces many businesses’ security and operational concerns when customers pay with cash.

With similar benefits to consumers, it is not surprising to see digital payments to merchants increase from a 13% share of volume in 2018 to 24% in 2020, reports"Bangko Sentral Ng Pilipinas (BSP) in Status of Digital Payments in the Philippines," 2021 Edition.

Economic growth has resulted from technology growth in the Philippines. By 2025, the Philippine internet economy will be worth $28 billion, up from $7.5 billion in 2020, according to the Department of Trade and Industry’s e-Commerce Philippines 2022 Roadmap.

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Cultural and technological barriers to adoption remain

Despite technology being embraced by many in the Philippines, there are still barriers to even more widespread access and adoption. Geographic challenges include digital logistics and delivery difficulties and a need for more stable, affordable and speedy internet availability.

Despite the impressive growth rate of digital payments, the fact remains that the Philippine economy remains mainly cash-based, despite handling and safekeeping costs.

Currently, only 5% of Filipinos pay utility bills digitally through bank accounts or mobile money accounts, compared to 22% in Indonesia and 80% in Malaysia, according to "The World Bank’s Philippines Digital Economy Report" in 2020.

Even for online shopping, cash remains core, with 77% of online purchases from sellers such as Lazada and Shopee settling with cash, says the BSP in the "2021 Financial Inclusion Survey."

Cash dominance is one reason banks in the Philippines continue to invest in their branch and ATM network. As of the third quarter of 2019, there were over 12,500 bank branches and over 21,400 ATMs across the country, growing at 4.4% and 1.6%, respectively.

In addition, Filipino businesses still rely on long-term, trusted relationships and person-to-person engagement.

In our world of financial services, relationship managers remain a critical sounding board and advisor to businesses on everything from managing financial processes to the latest cash management techniques.

Developing technology and people in parallel

The modern-day relationship manager brings to the table human-led service and support supplemented by the data insights, security and efficiency technology provides. Technology must therefore work alongside and facilitate human interaction.

This is why banks must continue to invest in branch networks and upskill their relationship managers. BDO Unibank, for example, has developed the only team of cash management and industry-specific relationship managers in the Philippines.

Our relationship managers work with our clients on their industry-specific current and long-term cash management issues and opportunities. From providing facilities for cover before revenue is received, to determining the best structure for payments and accounts, at BDO, we find ways for our clients to optimise their cash flow and working capital.

Furthermore, BDO Unibank continues to operate and invest in a network of more than 1,600 branches—the largest in the Philippines. Meaning human help is never far away when needed.

Aligned with its co-development approach, in branches, the bank connects the physical with the digital with online appointment booking, fully digital account opening, paperless in-branch cash and check transactions and cardless ATMs using biometric authentication.

These blended digital, in-branch solutions supplement over-the-counter services offered by BDO’s experienced tellers. Digital branch services are one example of the new era of blended financial financials services—physical services with digital overlays.

To ensure we continue to advance and provide our customers with the most secure and convenient services, we also invest in digital services that make it easy for businesses to receive customer payments and settle accounts with suppliers.

These include Auto Debit Arrangements, which seamlessly debit one account and credit the receiving organisation’s collection account. And our online business banking service provides easy and secure access to digital payments and account information through a range of devices.

An additional example is Virtual Accounts, which essentially provide separate ledger records or alias bank accounts, primarily used to categorize incoming cashflows and transactions.

Virtual Accounts are accessible for corporations to manage and inexpensive to maintain and operate. They provide a unique identifier number, or virtual account number, for customers to use when making payments to a business.

Virtual Accounts assist with liquidity management, reconciliation and reporting as payments are sent to a single bank account. In addition, as there are fewer bank accounts to manage, security is enhanced and fraud prevention is boosted.

BDO Unibank relationship managers work with clients to understand their incoming flows, payment segregation needs, and reconciliation requirements, to develop an optimized Virtual Accounts solution for their business.

Managing the tempo of technology change

The fundamental issues hindering technology adoption will take time to address. It is also essential to ensure innovation improves the lives of people and communities and does not create new inequalities.

Moreover, because technology creates a risk of leaving people behind and a digital divide, the pace of change and transformation to fully digital interactions for buying consumer goods, business-to-business transactions and access to government services must happen concurrently with the continued provision of traditional cash and human-based financial services.

Innovation, therefore, needs to be human-centric and considered, moving at a pace that balances embracing change while respecting today’s preferences and technology limitations.

About the Author: Carlo B. Nazareno is the senior vice president and head for Transaction Banking Group-Cash Management Services at BDO Unibank. 

Editor’s Note: This article is produced by BDO. It is published by the Advertising Content Team that is independent from our Editorial Newsroom.