How Philippines’ banking will look like in 2020

By Elyssa Christine Lopez |Entrepreneur Philippines | May 25, 2016


GOING DIGITAL.  BSP Core Information Technology Specialist Group Bank Officer V Anna Racines said the proposed NRPS framework would hopefully eradicate consumers’ initial hesitation to use digital banking. Photo by Elyssa Lopez / Entrepreneur Philippines

With the onslaught of Bitcoin and online shopping, banking and financial institutions are forced to keep up as the consumers’ habits rapidly change with the times.Bangko Sentral ng Pilipinas (BSP) is not turning a blind eye on these realities, in fact, they aspire that 20% of payments in the country will be done digitally by 2020.“A World Bank study actually showed that economies with great volume of electronic payments tend to have higher level of per capita income,” BSP Core Information Technology Specialist Group Bank Officer V Anna Racines said in her talk at the 8th BankTech Asia on Tuesday, May 24.

But the road to digital adaption will not be smooth ride, as a study of Better than Cash Alliance in 2015 revealed that out of all payment transactions done in the Philippines, only 1% are considered digital.


National Retail Payment System

So BSP proposed the National Retail Payment System (NRPS) framework to the industry that will, hopefully, convene financial institutions, banks, and other government agencies to embrace the digital solutions available and craft innovations for better services to the public. “The NRPS framework are high-level principles that would be followed by the financial institutions who wish to participate. This would hopefully enable interoperability between them with the assurance of safety and affordability for consumers,” Racines said.

Under the initiative, the electronic credit transfer scheme may be possible, which will enable any individual or business with an account in any financial institution to transfer funds and/or make payments to any other account within the framework. Once it pushes through, the retail payment system will hopefully clear consumers’ initial hesitation to keep their money in digital form for security purposes or impending inconvenience as its use is still limited.

BSP has been conducting studies since 2013 but only laid out the framework in December last year. Racines is positive the initiative will move forward even with the changing administration as President-elect Rodrigo Duterte also echoes what the central bank aspires for: a transparent and better banking service.

“I think President-elect Duterte will be supportive of this plan because he has previously stated he aims for transparency and what we’re doing are in accordance to his policies,” Racines told on the sidelines of the event. The passing into law of the formation of the Department of Information and Communications Technology is also good news for the central bank as this meant better government support of their initiatives.

Racines said they are still in talks with other government agencies like the Commission on Audit (COA) and Department of Finance (DOF) as they review on the present regulations and policies that could be impeding the NRPS to push through.“Although we already have the e-commerce law, there are still some policies that need to be reviewed. Like the COA mandates a physical receipt for some transactions,” Racines said.

TRAILBLAZING. FIN:TQ President and CEO Lito Villanueva said smartphones will be the leading banking chnnael by 2017 as more financial institutions adapt financial technologies. Photo by Elyssa Lopez / Entrepreneur Philippines

Emerging Filipino fintech

For the private sector, this has long been part of their plan even before the government took notice.In the first quarter report of PLDT Inc., the company highlighted their financial technologies’ triumphs, albeit small in scale today, and emphasized how the sector could be one of its revenue drivers in the future as part of their 3-year digitalization.

“Unlike what most believe, FinTech is an enabler not a disruptor for financial institutions. It will provide the gap for institutions to become competitive,” FIN:TQ President and CEO Lito Villanueva said in his talk at the 8th BankTech Asia. FinTech or financial technology is an economic industry composed of companies that use technology to make financial services more efficient.

Contrary to the public notion that FinTech is exclusive to millennials, Villanueva said a study showed 45% who use the technology are from Gen X. In fact, one of the emerging businesses in the sector is digital lending, which can still reach new markets especially in far flung, rural areas.

“In the Philippines, 21% of those who applied [for loans] came from third to sixth class municipalities or areas without brick and mortar banks. So banks, instead of building new branches, can actually just build better digital platforms to reach customers,” Villanueva added. The FIN:TQ executive said by 2017, smartphones will be the primary channel of banking, as most transactions would be done in a click.

“We have to make sure the solutions we will push to consumers are systemic, catalytic, transformational, and trailblazing for banks to stay relevant,” Villanueva said.


Which 3 Malaysian Banks are Working with Fintech Companies?

These days if you are within the financial services industry ecosystem, the biggest challenge of your day is to have an entire day go by without hearing the term

“Fintech is going to eat banks for lunch” – Everybody

(Though it’s highly recommended that you do not eat banks for lunch as it is neither nutritious nor delicious)

While I agree that fintech is really reshaping the financial landscape and will bring forth wonderful innovations in the years to come, I am curious if banks (or dinosaurs, as the industry so fondly refers to them as) will be pushed to the brink of extinction, like actual dinosaurs. It’s true, a large chunk of the bank’s profits are at risk but are banks taking a nice long afternoon nap while fintech slowly munches on their lunch?

Let’s explore some examples of Malaysian banks actively working with Fintech

cimb bank 2

CIMB bank is Malaysia’s second largest bank with 7.5 million customers in Malaysia alone. The group employs over 40,000 employees across the ASEAN region.In May 2015, CIMB launched their incubation programme known as Innochallenge. It is aimed at the ideation and creation of new fintech solutions. In this programme both CIMB and the Multimedia Development Corporation (MDeC) actively mentored the fintech startups.

They have picked 4 winners from that pool of fintech startups and they are developing the bank’s digital and mobile banking solutions. Logically, CIMB will also be hosting the 2016 session and it will focus on the following areas

  • Loyalty & Rewards
  • Identity, Security & Document Management using blockchain
  • Remittances
  • Mobile Payments
  • P2P
  • Digital Wallets

“One of the main reasons why we are tying up with Startupbootcamp FinTech is because CIMB has always been focused on technology.”

-CIMB group chief executive officer Zafrul Aziz.

On top of their Innochallenge, CIMB bank worked with Startupbootcamp in 2015 to mentor the fintech startups in Singapore. The main purpose of this partnership is to scout for, and evaluate, new technology and ideas for the future. It’s curious as to why CIMB chose Singapore instead of its home base- Malaysia, but upon further inspection you’ll find that it is likely because Startupbootcamp announced an exclusive partnership with RHB Bank (which we’ll talk more about shortly)


RHB Bank


RHB Bank is the 4th largest bank in Malaysia with a network of 210 branches in Malaysia and 19 across 9 asian countries. As mentioned in the earlier part of the article, RHB is the exclusive partner for Startupbootcamp within Malaysia’s fintech space. Their announcement of partnership came one month earlier than CIMB

RHB aims to bring digital innovations to the banking market in Malaysia through this partnership. In this partnership RHB will evaluate, fund, mentor and also organise hackathons in Kuala Lumpur. The group will also be spending 20% of their capex this year to execute new digital strategies.

“Our customers can expect to see the integration of seamless and innovative digital solutions from some of the best global and regional fintech companies.”

-Khairussaleh Ramli, RHB group Managing Director



Last but not least, Maybank is the largest bank in Malaysia servicing over 22 million customers.

In 2015 Maybank organised the Maybank Fintech 2015 in partnership with local VC firm L337 Ventures and over 100 technology companies from 10 countries took part in the event. In 2016 Maybank will target at least 200 companies to take part in the initiative.

Maybank sees MaybankFintech as a tremendous opportunity for Maybank to harness the startups ecosystem regionally, to acquire the best innovation ideas in financial technology.

Their focus for this year will be in the area of;

  • Mobile Banking
  • Payments
  • Lending
  • Distributed Database (Blockchain)
  • Asset Management
  • Humanising Financial Services (Financial Inclusion)
  • Security
  • IOT
  • Islamic Finance
  • Big Data


“Our Maybank Fintech programme is a unique platform for aspiring innovators to showcase their ideas. We want to be a central member of the Fintech community in the region, to help grow and support entrepreneurs, by providing them with an avenue to connect directly with the financial industry.”

– Micheal Foong, Group Chief Strategy Officer, Maybank

Several years back many of us in the industry were debating whether banks will fight these disruptive companies head on with better technology or steer towards collaborating with them. Recent news seem to indicate that banks are leaning towards working with them.

So what do you think fintech is eating the banks for lunch or is the bank buying lunch for fintech?

Let me know in the comments below

Quick Plug: Interested to find out more the fintech scene in Malaysia? Join us for our 8th BankTech Asia Conference & Exhibition in November 2016


About the Author

Vincent Fong is the General Manager of Knowledge Group and a self-proclaimed pundit of banking technology and fintech

Sneak Peek into Indonesia’s Fintech Regulation

Indonesia’s banking sector much like other parts of Asia is ripe for disruption from Fintech. While the banking sector has always been the cornerstone of economies, being the monolithic entities that they are, there are many gaps that can prove to be difficult to fulfil.

Regulators from around the world and Asia are very aware of that reality and Indonesia as a rapidly developing nation of opportunities is not blind to that fact. Having just finished BankTech Asia Jakarta this week, we had the pleasure of having Mr Dumoly F. Pardede who is the Deputy Commissioner of Supervision of OJK (Financial Services Authority) and Mr Tuahta A Saragih who is the Deputy Director of Enforcement, Financial Supervision Directorate to share an outline of what the Fintech regulation of Indonesia will look like at BankTech Asia Jakarta.

One of the key areas highlighted by OJK was the fact that financial distribution amongst the SME’s were severely lacking and the reality is that the banks alone are unable to solve this issue. Mr Tuahta was quoted saying that out of the 60 million Micro SME’s only 11 million of them have loan accounts in banks and they are largely concentrated within the Java Island.

financing distribution


MSME’s and SME’s are the backbone of economies and access to finance facilities is the lifeblood of these entities, the lack of distribution to them is not in line with Indonesia’s national program. He then added that this is where Fintech can really contribute to the nation.

With that in mind amongst various other factors was the reason why OJK came out with the guideline.

Dumoly quote

Mr Dumoly emphasized that while it is important to manage risks, it is also equally important to not stifle Fintech at its infancy. From what we gather during the speech, this is why the approach is being taken.

Mr Tuahta then shared  on the outline of how Fintech will be classified and the regulations that they will fall under, which provides some clarity on how Fintech companies can operate within Indonesia


It is also interesting to note that in a separate panel on Financial Inclusion Mr Pungky Wibowo who is the Head Group Development of Retail Payment System and Financial Inclusion also shared similar views that Fintech solutions can play a big role in financial inclusion, however as a regulator, he opined that they must still be on their toes to counter money laundering and terrorism financing.

Pungky Quote

All in all, our take is that, it is certainly very heartening to see the regulators encouraging the development of fintech in Indonesia. Emphasizing the regulator’s commitment in growing Fintech, both Mr Dumoly F. Pardede and Mr Tuahta A. Saragih is actively involved in organizing the Indonesia Fintech Festival, in which the guideline will formally be announced. We encourage anyone who is in Indonesia during that time to take part in this wonderful initiative from the Indonesian government.


About the Author

Vincent Fong is the General Manager of Knowledge Group and a self-proclaimed pundit of banking technology and fintech

iPhone 7: Implications on Financial Services

t’s no secret that since the first iPhone was launched in 2007 it has inadvertently transformed the way we go about our banking activities. Prior to the proliferation of apps, mobile banking was almost unheard of, these days if you are any bank of note you are likely to have a mobile banking app.

While many would argue that iPhone is no longer in the forefront of innovation, with over 1 billion units sold as of July 2016 it is a large user base to ignore completely. One of the main contentions of many people in this new iteration of iPhone is the removal of the audio jack and the introduction of Airpods.



While it may serve as a mere nuisance for it ordinary users, the implications for mPOS solution providers a far wider reaching. Ever since Square pushed this innovation to the market we’ve observed many local versions of Square in various countries enabling small to medium size merchants to accept credit cards and creating a society that’s more cashless.

According to research by Credence Research the mPOS market is predicted to reach 43.32 billion by 2022, with most mPOS players relying on the audio jack to read the cards, one wonders if Apple’s move to remove the jack from its iPhone will put a dent on the numbers.

While some players are still reeling in the news, players like CardFlight is quick to respond by issuing a public statement that their system will be compatible with iPhone through bluetooth.

Whereas Square has not issued any statements adapting bluetooth and instead will be relying on the adapters.


“Headphone jack adapters will work with the Square Reader,” says Leslie Jackson, a spokesperson with Square.

“We anticipate many types of headphone jack adapters will become available and will work to create the best solution for our sellers.”


While the adapter seems like a viable option, will it work awkwardly? The Apple adapter is not designed to create an anchoring to the force needed to be exerted to read a payment card.

Will the other players follow suit with bluetooth or will they rely on the adapters? Perhaps they will ignore the user base altogether?

At this juncture its really difficult to tell, with Apple’s steadily declining market share of 11.8% as of Q2 of 2016 and Android market share being more than 80% would it really be worth it for the players to re-engineer their systems to fit the new iPhone 7? This is especially since the iPhone 7 is yet be officially sold and there is no clarity on whether their will be many users switching from their earlier iPhones to iPhone 7.

However, on the flipside as an mPOS player if you do not make your system ubiquitous do you risk having the banks and merchants reconsider their relationship with you? Either way, the next few months will be an interesting one to observe.

Side note: There’s also this image circulating social media – what do you guys think, is there any meat to these claims? Let me know in the comments below



About the Author

Vincent Fong is the General Manager of Knowledge Group and a self-proclaimed pundit of banking technology and fintech