Saddled with inflexible legacy systems, many traditional banks in the Philippines, especially in the regional areas, have either struggled or refused to revamp their business models, despite the need to keep up with changing consumer demands.
This unwillingness to act has left a lucrative opening in the banking and finance industry, ripe for financial technology companies as well as other digital disruptors like Google and Apple to take advantage of. These organizations have since set out to make financial channels faster, cheaper, and better for consumers.
Banking’s non-traditional competitors
86% of Filipino households still unbanked
Millennials have already indicated their openness to banking with the likes of Google, Apple, and Amazon
Such competitors of traditional banking have produced innovative products that not only meet the demands of customers seeking mobile solutions, but also promote financial inclusion by easing the process for those who might have previously been excluded by the industry’s strict rulings and lack of accessibility to banking institutions.
As it stands, millennials have already indicated their openness to banking with the likes of Google, Apple, and Amazon, hinting at a shift in perception of what a bank should be and the possibilities of a future without traditional banks. 
With 86% of Filipino households still unbanked, financial technology companies and other new entrants will certainly stand a chance of stepping in to offer their services to these potential clients. They could perhaps allow them to make payments without an established credit card, provide loans to small businesses rejected by traditional banks, or support those without the necessary financial statements to prove their worth. 
Building a new eco-system with digital transformation
Despite these possible developments, traditional banking and financial establishments can still ensure a spot at the table by choosing to emerge from the silos they are currently in, and place their businesses at the center of this new emerging ecosystem.
By leveraging on the trust placed in them by existing customers and combining this with the latest digital transformation possibilities, banks can remain competitive and offer modern consumers what they seek, all while gaining new partners in the form of the financial technology companies who could have been their competitors.
One of the Philippines’ leading banks, UnionBank has already carried out a complete overhaul of their work processes to undergo digital transformation and encouraged a culture to embrace this change. Besides offering mobile banking to customers, the national banking network also established the country’s first fully digital bank branch known as Ark late last year, and has plans to implement more digital components throughout the rest of their network.
Blockchain trials, conducted in partnership with Microsoft on Azure, are expected to play a significant role in the next phase of UnionBank’s digital shift. In a bid to revolutionize their services and improve financial inclusion in the Philippines, the Pasig City-based organization will soon rely on blockchain technology to increase the efficiency of settlements and auto-update regulatory information on a secure platform, both of which will greatly enhance customer service.
The potential impact of blockchain technology
Blockchain technology can reduce processing time from days to mere seconds
Banks could save an estimated USD$10-20 billion annually
Indeed, banks that run on a digital core also typically record a reduction in costs and open themselves up to further digital transformation opportunities, especially with blockchain usage.
After all, blockchain technology can reduce processing time from days to mere seconds, hence lowering expenditure and improving customer experience. [5,6] Working on an up-to-date digital ledger that cannot be altered will also allow for the removal of overhead previously dedicated to confirming the authenticity of transactions, negating the need for intermediaries that would extract tolls to perform this check.
In fact, bigger banks could save an estimated USD$10-20 billion annually simply by using blockchain in their clearing and settlement processes. [3,4,5,6,7] The technology could also potentially change the game for trade finance, which remains heavily reliant on fax and post to move letters of credit, sometimes to as many as 50 people at a go. With a constantly updated record in blockchain, parties involved will instead be able to access all transactions, improving efficiency and reducing the risk of fraud.
There are numerous possibilities that can be realized with the adoption of blockchain and digital transformation, so read more about other technology-driven innovations that the Filipino banking and finance industry can utilize here.
1 – http://www.tnp.sg/news/views/digital-transformation-crucial-banks
2 – https://news.microsoft.com/en-ph/2018/03/02/digitizing-financial-services-ph-blockchain/
3 – https://www.ft.com/content/615b3bd8-97a9-11e7-a652-cde3f882dd7b
4 – https://www.accenture.com/t20170120T074124Z__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Consulting/Accenture-Banking-on-Blockchain.pdf#zoom=50
5 – https://bravenewcoin.com/news/why-blockchain-will-revolutionize-the-banking-industry/
6 – http://www.digitalistmag.com/digital-economy/2016/08/25/blockchain-technology-revolutionize-banking-industry-04417238
7 – https://www.finextra.com/finextra-downloads/newsdocs/the%20fintech%202%200%20paper.pdf