BPI steps up digital banking

The president and CEO of the Bank of the Philippine Islands (BPI), Cezar P. Consing, said the bank’s digitization efforts are being upgraded to a version he calls “2.0” in anticipation of better online and banking-based services. On mobile devices, even after COVID. 19 period, and it will reduce costs for both the bank and its customers.

“BPI at the moment is finished with the digitization stage ‘1.0’, we are moving to ‘2.0’. I’m sure we’ll get to ‘3.0’ after that. But we intend to stay at the forefront of this, ”Consing said during Part 2 of the AYALA-Finex virtual finance summit.

In a follow-up email consultation, Consing said digitization for BPI will be an ongoing process. “We measure progress by reducing our cost-income ratio, all things being equal. Generally speaking, moving from BPI Digital 1.0 to BPI Digital 2.0 should lower our cost-to-income ratio by, say, 3 to 5 percentage points, all things being equal, ”he explained.

The digital transformation of banks, and in particular BPI, depends on technology, people, analytics and, as Consing said, “we have to understand what our customers want.”

For BPI led by Ayala, technology represents 15 percent of the bank’s costs. “It’s about 7 or 8 percent of the bank’s revenue, so it’s a big expense for us,” Consing said during the online summit. Investments for digitization and IT are estimated at P4 to P5 billion per year based on revenue.

Of the bank’s 20,000 workers, 10 percent or 2,000 are directly related to technology. “That’s great when you think of 2,000 people doing tech at our bank. That is much bigger than many of the banks that exist, ”Consing said.

Consing said BIS, which represents P1 out of every P8 of loans across the banking system, has performed “OK” in this pandemic period. “But we really have to do a lot more,” he said. “We receive more than 20,000 registrations a week on our digital platform. We are seeing remittances, investments that are made digitally, but we would like to get to the point where we can allow people to open accounts digitally. We are almost there ”, he added. BPI is also preparing to offer and release loans digitally and build a deposit franchise digitally.

“COVID 19 has really tested our digital platform,” Consing noted. Before the pandemic, the percentage of digital transactions was 78 percent. During the shutdown that began in March, this number increased to 95 percent and after the government eased the community quarantine status in June, it has been at 92 percent.

“Today, with the lockdown eased, it’s still 92 percent digital. That is still pretty big. When we go back to whatever the new normal is, I don’t think we’ll go back to pre-ECQ levels. I think the digital percentage of the total transaction will continue to be very high, ”said Consing.

“A digitized BIS will be ready today and ready for the future,” he added. “Who knows what the future will bring? All I can say is that it is getting more difficult for banks. We have to focus on reducing our cost of service and that really speaks to operational efficiency. We have to lower the cost of financing. (and) the cost of our own mistakes (operational errors, bad loans), “Consing said.” We believe that digitization can help us overcome all of this and that is why we are tying our future.

Consing said the bank has already digitized most of its front-end services and operations, such as payments and remittances, as well as investments, account opening and loans. “We have adopted a mobile-first strategy and now we have a situation where we can modernize our processes for the digital and online world and we can scale. I’m not saying we’re done. If you look at this trip I would say we are ‘1.0’. We are now moving to ‘2.0’, but this is a process. “

Reading such digitization addresses five to six of the top eight challenges banks are currently facing. These challenges are fintech, cybersecurity, credit losses, regulation, labor arrangements, interest rate levels, the role of branches, and financial inclusion. And, with the pandemic, some of these problems have another level of complication.

“Today we face all kinds of challenges as banks. Before this crisis, fintechs were really the big challenge (also with) the levels of regulation, cybersecurity and interest rates, specifically the decrease in interest rate levels (which reduces interest margins). Now that the COVID crisis is coming, we now have to deal with challenging work arrangements. We have to deal with credit losses (and) it’s no wonder bad loans (delinquent loans) come up as borrowers have a harder time managing their loans, ”Consing said.

With the rise of banking digitization, Consing said that some of these challenges can be addressed through digitization. “Digitization can help address many of these challenges, 5 or 6 of these challenges, by lowering the cost of service, enabling financial security, through our accessibility, and reducing the risk of infection,” he said.

Consing said BPI’s digital platform is one of the best in the country, with half of its clients already enrolled or 4.3 million out of a total of 8.6 million retail clients.

The bank has about 2.3 million active users of financial applications, “some of them use the application 10 to 20 times a day, believe it or not,” he said. “But people always want more, and frankly they deserve more, they want more online, more data, and they’re more demanding, so we have to keep improving.”

BPI started its digital journey in 2016 with just 809 million online transactions. Today this is now 1.6 billion. From zero API or application programming interface revenue in 2016, it is estimated to grow to P1 billion this year. With more digital banking users due to the pandemic, Consing said they have 136 APIs in production and 154,000 APIs are used as daily consumption.