THE Bank of the Philippine Islands (BPI) is now on the second phase of its “digitalization journey,” which is seen to increase revenues by 20 percent over and above its base case projections by 2023.
Cezar P. Consing, BPI president of chief executive officer, reported this optimistic outlook during the Annual Stockholders Meeting (ASM) on April 25 at Fairmont Hotel in Makati.
Phase one took almost three years to complete and cost P11.6 billion. A third of this amount was used to lay the foundation of the digital infrastructure that included a state-of-the-art cybersecurity operations center.
Net income, expenses
BPI posted P6.72 billion in net income in the first quarter (Q1) of 2019, up 7.6 percent from P6.25 billion in the same period last year.
Operating expenses reached P12.07 billion in Q1 of 2019, up 23.8 percent year-on-year, across all major categories, and primarily in technology and premises, reflecting the impact of BPI’s continued investments in technology, digitalization, and its microfinance branch network, a BPI press release said.
Consing said in his ASM address that the digitalization journey may inconvenience clients, like what happened during the deposits systems upgrade, “but digitalization is the future and we will stay the course.”
“Digitalization has to serve the businesses, and we want to make sure our technology investment is in support of three areas--small and medium enterpise (SME)loans, consumer loans and microfinance,” he said.
It did this on phase one by launching the Business Bank, reengineered housing and auto loan processes and opened 100 more branches.
Higher loan yields
“Our goal is to see that our SME loans, consumer loans, and microfinance loans, will over time account for a larger percentage of our loan book, which is predominantly corporate in nature,” he said. “This will translate into higher loan yields and better net interest margins for the loan portfolio as a whole.” “We believe we are the Philippine bank with the highest digital adoption rate in terms of number of users. Digitalization is about enhancing the client experience with our bank,” Consing said.
Phase two of the digitalization journey will be focused on establishing a baseline that will allow clients to engage more, be empowered and experience everyday, Consing said.
“Digitalization will allow us to become more financially inclusive by increasing engagement with SMEs and the lower-middle and lower income customer segments,” he said.
Open banking
One way to do is through open banking, which makes the bank’s services available as application programming interfaces to fintech and e-commerce companies such as G-Cash and Lazada.
Another is the BPI Direct BanKo, a “reincarnated platform” that makes loans to self-employed micro-entrepreneurs.
In three years, BanKo has made over P4 billion in loans to almost 60,000 entrepreneurs.
Although banks, with current cost restrictions, tend to give more attention to larger corporates and mid-upper income tier customers, “SMEs and the lower-middle to lower-income consumer segments are growing at a very fast rate,”g said.
“Truly sustainable”
“Digitalization will reduce our cost to serve and will therefore permit a much higher level of engagement with these segments,” the BPI CEO said.
It will make “financial inclusion truly sustainable,” Consing said. “(It) is about enhancing the client experience with our bank,” he said.
“Digitalization will empower our clients as they will be able to bank with us at any time wherever they may be and in a manner that is responsive to their particular requirements,” he said.
Consing rallied stockholders to confidence, saying, “We are BPI-ready today, ready tomorrow.”