Some may say that the financial banking systems in our country are archaic, and this would have been spot-on up until recently. Now, though, there’s more than enough reason to believe that Filipinos are beginning to see digital banks in the PH as viable safehouses for their hard-earned money. Here’s why we think so.
Here’s some context on the financial situation in our country: around 44% of the population remains unbanked to this day. There are several contributing factors: lack of financial know-how, accessibility, lack of trust in these institutions, insufficient funds, or just failure to present government-accredited identification. Citizens in the lower socioeconomic classes are deprived of at least one of these things, resulting in an unbanked status.
Seeing that it’s already a struggle to have people open bank accounts, there is an ever greater difficulty in transitioning people from their established banks to digital newcomers. Surprisingly though, a study by consulting firm McKinsey and Company discovered that the 12% adoption rate for digital banks in the PH last 2017 skyrocketed to 85% this year. That’s a monumental increase that places the Philippines near the regional average of 88-89%.
The primary reason for this is simple: digital banks in the PH yield higher interest rates compared to their traditional counterparts. We go in-depth on the six accredited digital banks in the country in this comprehensive piece, but average interest rates of 4-6% are high enough to tempt users to give it a try.
Another factor could be the emergence of e-wallet systems. When you can earn, pay, and transact digitally, there’s no point in having cash on hand except in emergency situations. And when consumers realize that they’re doing everything digitally, then there is an incentive to just go with an institution that gives them the highest returns and incentives for their deposit.
Speaking of incentives, PH digital banks also hold the same “user reward programs” that traditional banks used to boast. Strategic partnerships such as GoTyme to Cebu Pacific allows its users to boost prize miles systems to give access to cheaper or even free flights. Who wouldn’t want that?
At the end of the day, while Filipinos still prioritize safety, security, and brand name, it’s not enough to keep a banking business successful. It needs to remain somehow competitive with the newcomers in terms of numbers while still providing quality, reliable service.