PH lags in digital banking in Asia, says survey

DIGITAL banking in Asia is on the rise, but a recent survey from a multinational consulting firm showed that the Philippines has the lowest penetration rate in digital banking among the 13 countries surveyed.

A study from McKinsey and Company showed that the digital banking penetration in the Philippines was only at 13 percent as of 2014. In contrast, South Korea’s rate is 96 percent, the highest among the countries surveyed, while Singapore is at 94 percent, Hong Kong at 93 percent, and Taiwan at 92 percent.

In emerging countries, Vietnam led the race at 44 percent penetration rate, followed by Malaysia (41 percent), Indonesia (36 percent), Thailand (19 percent), India (18 percent), and the Philippines (13 percent).

The study team defined digital banking penetration as the number of users of Internet or smartphone banking divided by the total number of banking consumers in each country. Only urban consumers, composed of 16,000 financial consumers across the 13 countries, were included in the survey, which took place in July to September 2014.

However, for some local bankers, the low digital banking footprint in the country could mean that traditional banking among Filipinos remains a “convenient” practice.

Close enough

Cebu Bankers’ Club President Gino Gonzales said the proximity of bank branches, especially in urban areas, has allowed consumers to consider going to banks even if there are alternatives like digital banking.

“Despite the allure of digital offers, our survey also shows that physical branches and ATMs will continue to play a major role in banking across Asia. Incumbents and entrants alike will have to balance needs of consumers and regulators for a physical presence against the cost and reach advantages of digital services,” the study noted.

McKinsey said that the primary obstacle in digital banking was that the products are so “complicated that they needed a person to explain them.” Security concerns are also an issue. The study said this stopped about 56 percent of the respondents in emerging Asia and 44 percent of those in developed Asia from purchasing products online.

The study team expressed optimism that digital banking in Asia will continue to grow, with many Asians increasingly becoming open to use the Internet and other mobile platforms when making financial transactions.

Risk management

The Bangko Sentral ng Pilpinas is also promoting digital banking among Filipino consumers.

Two years ago, it issued Circular 808 or the comprehensive guidelines on technology risk management in response to security concerns on electronic money operations.

In September 2013, the BSP licensed the first EMI-NBFI (electronic money issuer-non-bank financial institution). The BSP also said there are three branchless banking business models in the Philippines. These are the bank-centric or bank-driven emoney issuance; telco-centric; and “hybrids” or banks providing services primarily through mobile phones.

A Nielsen survey in 2014, published in its website, also ranked the Philippines at the bottom in terms of smartphone penetration among emerging countries with a large smartphone footprint.

In the Asia-Pacific, smartphone penetration is highest in Hong Kong and Singapore at 87 percent. Penetration in developing Asia Pacific markets is highest in Thailand at 49 percent, followed by Indonesia (23%), India (18%) and the Philippines (15%).

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