THE movement restrictions brought by the measures against virus transmission has highlighted the value of online transactions instead of actually going to the establishment. This has been proven doable for industries like education, entertainment, business and even banking.

While there are a number of Philippine banks that have been using mobile apps even before the pandemic, consumers and business owners using and downloading digital wallets have also become more apparent. To keep up with the inevitable changes in the banking industry in the country, Tonik, a financial technology company based in Singapore will be establishing Tonik Digital Bank in the Philippines in the first quarter of 2021. Tonik will be an all-digital bank, the first of its kind in Southeast Asia. As there are other digital banks in operation in the Philippines now, Tonik will be all-digital and will not be establishing physical branches anywhere.

Despite the apparent advantages of doing financial transactions remotely like paying the bills, saving and fund transferring, one problem that continues to haunt the Philippine economy is the fact that many Filipinos still do not have savings accounts in the banks and still resort to traditional savings at home. Working closely with Bangko Sentral ng Pilipinas (BSP), Tonik Bank aims to assist BSP in addressing this dilemma.

On their website, Tonik recognizes that 70 percent of the Filipinos remain unbanked. Part of their mission is to give these Filipinos and the other 30 percent “a digital-only bank that is simple, not intimidating, helps them save, all at a click of a button.”

In an interview with Long Pineda, Tonik Bank president and country manager, she said they realized that one of the reasons Filipinos are hesitant to do digital banking is the inconvenience one has to go through to secure an account or, at least, open an app counterpart for their existing account.

“We want to educate the people to open a bank [account]. It’s very easy for people to open an account with us. It’s less tedious and easier. You won’t need a very high-end smartphone to access,” Pineda said.

Through their focus group discussion prior to establishment and while securing necessary permits, Pineda said they learned that users also take into consideration the number of screens and steps they need to go through to open an account.

“With us, in two to five minutes, you’re on board,” she shared.

Tonik targets young professionals from 25 to 40 years old who are already earning and would love to set aside specific amounts regularly for saving and for building up a portfolio. Pineda said what they want to bring in the banking space here is a more unique and newer experience for their clients.

Operating as a rural bank per the license issued by BSP, Tonik will be offering retail financial products, including deposits, loans, current accounts, payments and cards.

“We’re not going to be a universal bank. How we position ourselves is not to be the main bank of the clients. We’re not going to compete with the existing banks here in the Philippines. What we want to offer is to be a savings bank that actually earns,” said Pineda, who compared their saving services to that of Paluwagan but digital.

She said while traditional savings accounts in other banks offer interest rates of about 0.5 percent, they can offer up to 2 percent. While other banks offer time deposit interest rates of about 2.5 percent to 3 percent, theirs is at 5 percent.

“Basically, you can enjoy a 2 percent to 5.5 percent interest rate with Tonik, depending on the deposit account you are using,” she said.

“We do not have very high capital expenditures because, again, we are fully digital. That's why we can offer high rates. On the other hand, our overhead is also much lower than the other banks because we do not have a physical branch, only a physical head office in Manila,” Pineda added.

As a neobank, Pineda said one feature Tonik Bank is proud of is the client’s full control over their accounts. They can turn it off anytime they wish – for financial discipline and security. On top of that, as they target the younger Filipinos, the app is also customizable according to the client’s preference.

During their focus group discussion, Pineda said they understood trust and security is one of the primary factors Filipinos consider when dealing with a bank -- whether traditional or digital. Because of this, she said they invested in a state-of-the-art security system which she fondly referred to as the “Rolls Royce of security.” She also assured their clients that their Know-your-customer (KYC) feature is easy to use and double-checks the information logged by the client. In this way, no fake accounts will be created. Deposits are also insured by the Philippine Deposit Insurance Corporation by up to P500,000.

Just the end of November, the Monetary Board of BSP approved the recognition of digital banks as a new bank category separate and different from existing bank classifications.

“Digital banks will play an important role in the digital financial ecosystem. We see these banks as additional partners in further promoting market efficiencies and expanding access of Filipinos to a broad range of financial services, bringing us closer to the realization of our target that at least 50 percent of total retail payment transactions have shifted to digital, and 70 percent of adult Filipinos have transaction accounts by year 2023,” said BSP Governor Benjamin E. Diokno in a press release published by BSP.