171-year-old BPI not yielding to digital-savvy challengers

The country’s oldest bank is gearing up for competition with the next-generation digital lenders and aggressive financial technology (fintech) platforms.

The 171-year-old Bank of the Philippine Islands (BPI), owned by Zobel-led Ayala Corp., is ramping up spending on digital products and cybersecurity by 50 percent to about P13.5 billion in 2022, company president Jose Teodoro K. Limcaoco said on Thursday.

He also revealed plans to launch, as early as May this year, a new “high-yield deposit product” targeting unbanked and underbanked customers, creating a new revenue stream that would boost its earnings moving forward.

“It’s not an unprofitable business to get these kinds of depositors and provide them these services,” Limcaoco said.

With larger institutions focused on higher value customers and businesses, tens of millions of Filipinos remain outside the formal or traditional financial sector.

But the calculus is changing for large banks as fintechs and a new wave of digital lenders are successfully moving into the unbanked sector—with the backing of moneyed technology giants and international financing.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said last February that Filipinos with access to banks and e-money channels doubled to 41 million over the past two years as electronic accounts surged by 16.8 million users.

Limcaoco said their upcoming high-yield deposit product would also cater to the market segment being lured by the higher interest rates offered by fintechs, which have lower operating costs compared to full-service banks.

Moreover, these new customers could eventually avail of their consumer, salary and even small business loans, which was in line with BPI’s approach for more inclusivity.

“This is just a natural progression of that as we can get depositors in,” Limcaoco said.

The business case was aided by the COVID-19 pandemic that pushed vast numbers of transactions online, lifting fintech valuations to new heights.

GCash’s operator, owned by BPI’s affiliate Globe Telecom and Chinese billionaire Jack Ma, was valued by investors at about $2 billion last year. PayMaya’s operator, whose owners include PLDT Inc. and Chinese tech giant Tencent Holdings, was recently valued above $1 billion.

During the stockholders’ meeting, Limcaoco addressed the potential threat of digital banks.

“They have advantages such as lower regulatory burden and they have no legacy systems or even physical networks they are tied down to, which allow them more flexibility and innovation in their digital offerings,” Limcaoco said.

He said BPI would continue investing in technology.

“The healthy competition coming from fintechs and new banks together with the incumbent banks will definitely result in a very interesting industry and more developments in the coming years. And our bank is ready for that,” he said.