Philippine banks embrace digitalisation to fuel expansion plans

Lenders are shunning inorganic growth via M&As.

The expansion plans of Philippine banks may gain more traction if they embrace digitalisation over the prospect of inorganic growth via mergers and acquisitions, according to Moody’s Investors Service.

Also read: Philippine bank lending surges 19.4% in May

“The current thinking we are seeing now across the banks is that rather than merging with another bank and inherit problems, it might be a lot more cost efficient to rely on digitisation to scale up the business and grow a lot faster,” Simon Chen, senior analyst at Moody’s Investors Service told local media in a media briefing.

M&As would also entail striking synergies between varying agendas of involved players and are hard to achieve in the short term as such deals usually take several years to complete, suggested Chen.

“More banks are thinking that it might be more cost efficient or more in line with the thinking that to grow forward, it is to rely on digital and to scale up the business rather than to acquire another problematic bank and digest the issues over a longer period of time,” Chen was cited saying in Business World.

The Philippines represents a massive opportunity for banks to deploy digital alternatives in an effort to reach around 60% of the adult population that remains unbanked, according to World Bank data. 

Also read: E-wallets to snap up 6% of Philippine payments by 2022

The tech-savvy millennial population is also a plus in accelerating digitalisation efforts, Chen added. In fact, the World Bank notes that the share of Filipino adults who paid bills or bought products or services online hit 9.9% in 2017, whilst those who made or received digital payments in 2017 surged to 25.1% over the same period.