Digitalisation and technology in the banking industry, particularly for rural banks, make banking more flexible and accessible for unserved or underserved communities.
A virtual event hosted by Bankers Institute of the Philippines (BAIPHIL) and co-presented by SAP last March tackled how digital innovations in rural banking can significantly contribute to the rural economy and deliver relevant services to the communities in the countryside. Themed “Digitalisation in Rural Banking: Strategies for Financial Inclusion in the Midst of the Pandemic and Beyond”, the event highlighted how financial inclusion can be better realised with technology adoption and how rurals banks can transform into intelligent, agile, and sustainable organisations.
Sharing about the hurdles rural banks in the Philippines currently face, Estrellita Ong, Director of the BAIPHIL and Chief Internal Auditor of BDO Unibank Inc., said:
“Rural banking is a segment most vulnerable to economic stops brought by calamities and the pandemic. It also requires approaches that are more personal, inclusive, and far-reaching. And while competition is fierce, regulatory compliance is a must.”
“That is why rural banks need more than good people and sufficient capital. It requires an upgraded and robust IT infrastructure to keep pace with the evolving technology landscape,” she stressed.
Embracing Technology in Banking Industry
A study by Bain & Company, Google, and Temasek (2020): The Future of Southeast Asia’s Digital Financial Services, revealed that over 70{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of consumers are either underbanked or unbanked. In Malaysia, around 55{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of the adult population is still underbanked and unbanked. In the Philippines, Bangko Sentral ng Pilipinas’ (BSP) 2019 Financial Inclusion Survey revealed that almost 71 percent of the country’s adult population was unbanked.
With the pandemic as the catalyst urging people to embrace digital banking, the BSP report stated that Central Bank is forecasting that at least 70 percent of the adult population will be bank account holders by 2023.
During the event, Nitin Vohra, Director of S/4HANA Center of Excellence for SAP Asia-Pacific and Japan, emphasised the pivotal role of technology and business innovations in advancing the banking sector. Detailing the need for rural banks and other financial institutions to devise a digital strategy that would allow them to strategically compete with traditional universal banks, he said:
“Banks should rationalise their product offerings and concentrate on areas that command a competitive advantage. Another option is to become a service provider to other banks or fintech companies to eliminate the need for others to engage in heavily regulated industries and activities, readily taking on the compliance burden.”
Vohra said that banks can operate as aggregators of financial services and products, which would not only save manufacturing costs and ensure compliance but also offer customers a comprehensive product portfolio. He added that it is pertinent to adopt a vertically integrated yet open platform to be able to deliver a higher level of customer satisfaction, capture the network effects, and leverage their competitive advantage.
RISE with SAP for Banking
As a long-time key player in the Financial Services Industry (FSI) market, SAP has been supporting over 80{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of the top 1,000 banks and insurers worldwide. Last year, the German software giant launched SAP Fioneer, a dedicated FSI unit co-owned by the German software enterprise with entrepreneurial investor Dediq, to propel its Financial Services customers’ journey to the cloud through new enterprise-grade solutions based on SAP software.
Rural banks need to keep pace with today’s changing banking industry. SAP highlighted in the virtual event that to be able to transform into intelligent, sustainable enterprises, rural banks must continuously implement technology innovations, such as RISE with SAP, and best practices within its integrated business processes. SAP’s concierge, Business Transformation as a Service solution streamlines customers’ business transformation by bundling specific solutions and services under a single commercial contract.
“RISE with SAP provides cloud delivery capabilities that enable the journey to become intelligent banks. It mitigates risk, reduces cost, and accelerates time to value. It leverages the SAP reference architecture built with the industry’s best practices over the last five decades,” commented Nitin.
