SE Asian banks to weather fintech disruptions, says Moody’s

Banks in Southeast Asia, including those in the Philippines, are in a good position to weather market disruptions from financial technology players considering that they have done well with their own digital transformation efforts, according to Moody’s Investor Service.

The global credit watchdog said in a report that incumbent banks in the region have invested significantly in digital transformation to compete with fintech disruptors, with the result being a widespread customer adoption of their digital channels and improved product quality.

“The competitive space for digital financial products will continue to evolve, but Southeast Asian banks are well-placed to compete, given their track record over the past few years, and more so for large banks with the scale to make necessary investments,” Moody’s said.

As for the disruptors, Moody’s said growth among fintechs has been uneven and would likely moderate.

“Many were able to build up huge customer bases, though their service offerings are largely limited to digital payments and expansion into other financial services remains modest,” the company said.

“Fintechs remain loss-making and tight funding conditions will curb their near-term growth.” Moody’s observed that even among incumbents like Union Bank of the Philippines, products other than payments are also being offered through digital platforms.

UnionBank itself saw the number of accounts that were opened through digital means by 53 times in 2021 alone. Also, incumbent banks have applications that offer a comprehensive suite of financial products for retail customers and small and medium enterprises. On this, UnionBank has UnionBank Online, bonds.ph and UnionDigital Bank for retail as well as UnionBank SME Lending and The Portal for SMEs for small and medium enterprises (SMEs).

Also, Bank of the Philippine Islands has BPI Mobile, VYBE and BPI Trade for retail clients as well as Bizko and BizLink for SMEs.

For disruptors, among the Philippine players mentioned was GCash, which offers digital wallet and other financial services. Meanwhile, Maya also offers these in addition to pure-play digital banking operations.

Aside from Maya, there are only five other licensed digital banks in the Philippines — Tonik, Go Tyme, Overseas Filipino Bank, UnionDigital and UNOBank.

Further, Philippine regulators have rolled out real-time payment systems that may be used to bridge incumbent and fintech service offerings. These are the InstayPay transfer system and the QR Ph system.