A Life Less Analog, Technology

Phygital banking is the way to go, says BPI

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While other banks are talking about digital banking, Bank of the Philippine Islands (BPI) has said it is already looking ahead and pursuing a phygital banking strategy.

As one of the country’s top banks, BPI has aggressively pushed digitalization. However, it also recognizes that customers require different channels based on their preferences and types of transactions.

The new normal

Phygital banking is the way to go. says BPI
BPI’s board of directors and other officers meet the stockholders via video conferencing during the bank’s first virtual annual stockholders’ meeting. Shown here in the screenshot are, from left: Jaime Augusto Zobel de Ayala, Chairman; Cezar Consing, President and CEO; Atty. Angela Maramag, Corporate Secretary; Maria Consuelo Lukban, Head of Corporate Strategy and Investor Relations; Romeo Bernardo, Independent Director; Xavier Loinaz, Independent Director.

“We don’t believe it will be a cold turkey-type scenario where people just switch to digital right away. We believe that in the near term, the success of digital banking will be determined by how you harmonize your digital [channels] with your physical branches. In BPI, we call that phygital,” BPI COO Ramon L. Jocson said in response to my question.

What does phygital banking mean? Phygital is a portmanteau that combines “physical” and “digital”. Phygital banking recognizes that neither a purely digital nor a purely branch banking approach can provide a complete customer experience.

In the new normal that the COVID-19 crisis is creating, companies and consumers alike are embracing digital even more. Case in point: BPI made history today by holding its very first virtual annual stockholders’ meeting this morning. Afterwards, the bank held its first virtual press briefing, where Jocson was one of the speakers.

How digital is disrupting banking

BPI holds its first ever press briefing via virtual conference. Shown here are, from left: Juan Carlos L. Syquia, Head of Corporate Banking; Maria Theresa Marcial Javier, Chief Finance Officer; Cezar P. Consing, President and CEO; Ramon L. Jocson, Chief Operating Officer; and Marie Josephine M. Ocampo, Head of Mass Retail.

Even prior to the COVID-19 crisis, the Philippine banking industry has been undergoing disruption. All-digital banks have entered the Philippine market, including CIMB and ING. TONIK, the first digital-only bank in Southeast Asia, is also entering this year.

Competition is also coming from unlikely quarters. Ridesharing-giant-turned-super app Grab is partnering with Singtel for a digital full bank license in Singapore. And then there’s gaming company Razer. Its Razer Fintech arm has applied for a banking license to create the world’s first global youth bank.

Advantage of phygital strategy

BPI COO Ramon L. Jocson says that phygital banking harmonizes the bank's digital channels and physical branches.
BPI COO Ramon L. Jocson says that phygital banking harmonizes the bank’s digital channels and physical branches.

Jocson said that when it embarked on digitalization, BPI already adopted a strategy that anticipates digital disruption and unlikely competition.

“We already embraced open banking, where we said that we will partner with fintechs. We opened most of our banking systems to application programming interfaces (APIs). In fact, amongst the banks, I think we have the most APIs exposed to partners like GCash and PayMaya.

“We believe that we are positioned well for what will come next. Amongst the banks, I think we have the highest penetration in terms of usage of digital. Eighty percent of our clients are already on the app, or already on the web. We have around 2.7 million clients who are using the app at any one time. We consume around 300 million API transactions in a month,” Jocson said.

Moreover, by adopting a phygital banking strategy, BPI is able to optimize digital channels for high-volume routine transactions while providing higher-value services through physical branches.

“[You have] the digital channels, where you fob off most of your low-value, once-and-done transactions, everyday transactions, self-service, convenience banking. And then where you have your physical branches now freed up to do high-level conversations, more value-added transactions, and so forth. That’s key. You need to be able to do that. If you take a look at the pure digital banks right now in the country, you can only count the number of products that they offer. Because beyond that, you still need face-to-face discussion with clients as they move up in the value chain of banking. Our phygital strategy should be able to help us lead in tbis new kind of banking,” Jocson said.

Digitalization and financial inclusion

BPI President and CEO Cezar P. Consing said the company wants to become a "more financially inclusive bank".
BPI President and CEO Cezar P. Consing said the company wants to become a “more financially inclusive bank”.

“Digitalization is gaining considerable traction, with gains that are tangible and visible. Online transactions, which in 2019 were up by 50%, account for practically all of the growth in the bank’s transaction count. About 40% of the bank’s customers are now enrolled in one or more of our digital channels, with 25% of all customers regular digital transactors. Digital service fees now amount to Php1 billion per annum, with over Php 220 million in API revenues added in 2019 alone,” BPI President and CEO Cezar P. Consing said in his speech at the annual stockholders’ meeting.

Consing added that the rate at which the bank is digitalizing will create about 20% additional capacity in the over 850 BPI
and BPI Family Savings Bank branches by the yearend.

More importantly, Consing said BPI is focused on becoming a “more financially inclusive bank”. He cited the bank’s microfinance and small and medium-sized enterprise (SME) lending businesses.

Twenty journalists from various media outlets nationwide attend the press briefing of BPI via Cisco Webex.
Twenty journalists from various media outlets nationwide attend the press briefing of BPI via Cisco Webex.

“Asiamoney rated BPI Best Bank for Microfinance because of BanKo’s growth. More than the results and the accolades, we are very proud of how BanKo has changed the lives of its clients.

“On the SME front, the two-year old Business Bank is attempting to replicate the early success of BanKo. While the SME loan portfolio grew only 6%, the lower end of the portfolio – that for loans below Php 15 million – showed a 4.3x increase in approved loan applications, reflecting our tailor- fit solutions and dedicated coverage of the segment,” Consing said.

At the end of the day, digital transformation is not just about technology. It is a change in mindset, and a willingness to adapt your strategy to what your customer actually needs.