Future of banking

Coming from Edwin Bautista, current president and soon to be CEO of one of the country’s top commercial banks, it is not difficult to believe that brick-and-mortar banking is on its way out in favor of more transactional digital financial services.

Over the last decade, UnionBank has been setting up its infrastructure system to respond to what it perceives would be the banking mores of tomorrow. While it still maintains a high degree of visibility through bank branches in strategic parts of the country, Bautista says that it is opening lesser branches in recent years compared to competitors.

Recently, it launched The Ark, a bank branch that seems to be a tentative and experimental approach to banking. Here, clients are handed a tablet when they enter to do their banking needs. (No, you can’t bring home the tablet.)

And yes, the traditional bank tellers will no longer sit behind a counter, but will be physically more mobile while helping clients navigate their financial accounts on the loaned tablet.

The Ark (located along Ayala Ave. in Makati) would have the vibe of a coffee shop lounge, and will cater to a select set of clients, but not limited to those who are comfortable with digital technology. There are no plans for a second one yet this year, which should give one an idea of how experimental this voyage will be.

As the ninth largest  bank in the country, UnionBank’s size allows it to have better flexibility with regards technical innovations. It helps that Justo Aboitiz, current CEO and chairman of this Aboitiz Group affiliate, is an innovator who has immense interest and knowledge in digital banking.

If you’re wondering if UnionBank is moving towards the right direction, one must understand the changes that are coming with the growing sophistication of artificial intelligence (AI) and cognitive computing, and its impact on the banking industry.

In a survey by Viacom Media Networks among millennials, the top four banks in the world were the least favorites among this age segment. They, instead, were more aware of personal financing tools like crowdfunding, virtual currencies, and online payment apps.

A paper by IPsoft, a global digital company, points out recent developments in AI that will push banks to become more automated. This means that more clients will rely on their mobile phones to transact other banking needs on a 24/7 basis.

Virtual customer assistants

By unleashing the banks’ immense data wealth, AI will make it possible for banks to make use of virtual customer assistants. Think of a computer-generated bank teller that can speak, deliver fast response on queries, but still exude the ability to sympathize or empathize with humans.

Best of all, AI is seen to deliver lower operating costs for banks, and therefore should be able to pass on this savings through better interest rates for their clients. Internet banking is already a reality, but which unfortunately, are not yet available in the Philippine banking system setting.

Internet banks should be the next stage in our banking history, given that AI-empowered banks will still be a thing of the future in a developing economy like ours.

Aside from offering some of the lowest fees, internet banks allow an individual to open as many accounts needed without the fees involved especially in maintaining a set fund balance.

Best of all, it becomes a great tool for personal finance. You can open separate accounts to help you manage your financial goals, for example, when saving for a house or car, preparing for retirement, or your children’s education plan.

For the digital age generation, internet banking best suits their lifestyle of relying on apps on any of their mobile platforms to access financial accounts. They can purchase goods or services at any time of the day or night, pay bills without stepping out, and check their balances any time.

We’ve seen how credit or debit card purchases in other countries can be tracked down through message notifications, something that I presume Filipino consumers would welcome with open arms.

Other more sophisticated dealings like getting a loan for a house or car, buying fixed-term investments, and transferring funds between accounts are already available with our big banks, but internet banking raises the service a notch higher by doing away with any personal interaction with a real customer service bank representative.

Drawbacks

There are a few drawbacks on internet banking which should be factored in as our digital-savvy countrymen move from the current bankbook, checking account, and ATM banking practices to one that is internet based.

First and foremost would be internet access. With the current service we get from our telecommunications providers, it is not unusual to experience poor access to internet-based banking transactions, a major concern when you badly need to buy an airline ticket, for example.

Investopedia.com says that the most common complaint about internet banking would be in funding your account. Good if your Internet bank account is directly linked to your payroll because this ensures almost real time transfer of money.

If it is not, then you to still have go out to deposit in a bank or an ATM, and the clearing time for such, especially if the deposit is in check form, takes time.

Some people value face-to-face relationships with loan officers, especially if their credit standing has some limitation. With Internet banking, the loan process is highly automated and the approval process is dependent on a determined set of credit rating parameters.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.