Usage of e-wallets during the pandemic saw an unprecedented surge in the Philippines. This continues and other financial services are easing into the consciousness of consumers, according to Finastra, a global provider of financial software applications.
Financial service institutions (FSI), including banks, have been moving their operations to the cloud adopting Software as a Service (SaaS) and open APIs (application programming interface), among other solutions and services. According to Finastra, cloud infrastructure is known for being cheaper than on-premises infrastructure, as well as enabling much greater agility and speed to market.
“Banks need agility, scalability, and elasticity,” said Dheeraj Joshi, regional head, of Payments Solution Consulting, Finastra. “With digital wallets and fintech (companies) offering cheap, fast payments within easy-to-use apps, banks need to reduce their operational complexities and cost per transaction, while matching their digital competitors on customer experience.”
The country’s Bangko Sentral ng Pilipinas has granted licenses to six digital banks last year, which operate mostly in the cloud. Some of the traditional banks, on the other hand, are in their process of modernization, also utilizing the cloud infrastructure.
Finastra said concerns over issues like security and regulatory compliance have previously prevented incumbent banks from moving to the cloud, “but these concerns have been mostly overcome in recent years following huge investments from cloud providers.
Among the solutions banks can leverage is API, which enables the seamless sharing of data. With API banks can use specially designed software that they can plug into their own systems, rather than build them themselves.
“Instead of taking years to develop new services, banks can choose, implement and launch new services in months or even weeks,” Finastra said.
Finastra noted that Banking as a Service (BaaS) and embedded finance are gaining traction in the Philippines. BaaS allows digital banks and other third parties, such as digital wallets, to connect with banks’ systems directly so they can build banking offerings on top of the provider’s regulated infrastructure. Embedded finance enables traditional financial services, such as lending or payment processing, to be embedded into non-financial apps or websites, such as e-commerce.
“This can be a major new revenue stream for banks as it enables them to go directly to customers at their point of need, instead of customers having to choose and connect with the bank,” Finastra said. “This is demonstrated by the success of Buy Now, Pay Later (BNPL) which is expected to have grown by 80% in 2022 alone in the Philippines.”