The Philippine banking market, abundant in growth potential particularly within underserved rural and SME segments, is seen as a crucial Southeast Asian market for digital business transformation by consulting firm Publicis Sapient, even though the country lags behind in technology adoption.
While digital banking penetration is expected to rise from 22 percent in 2023 to 33 percent by 2028, traditional banking penetration has already surged from 29 percent in 2019 to 56 percent currently.
However, a significant portion of the rural and SME segments remain underserved, with digital channels contributing only 5-15 percent of their revenue, far below the 25 percent average for Asian emerging markets.
Despite being among Southeast Asia’s fastest-growing economies, Philippine banks have underinvested in digitalization, spending less than 10 percent of revenues on IT compared to APAC counterparts’ average of 15 percent, resulting in a technology lag and legacy technology challenges.
This technology gap has contributed to a disparity between the underbanked population and the innovative financial technologies available, as traditional financial institutions concentrate on commercial lending, leaving a digitally savvy population with limited access to suitable financial services.
While some local fintechs and digital banks are growing significantly, the call for improved customer experiences, particularly through digital channels, remains strong, with 92 percent of Filipinos willing to pay for instant account opening through digital means and an eagerness to switch to providers offering enhanced personalization.