RURAL banking has always been a critical sector in the financial service industry. Banks in the countryside help promote and expand the rural economy and provide essential financial services to rural communities unserved or underserved by commercial banks. They cater to the retail sector and the unbanked or those unreached by banks and similar financial institutions.
In its 2019 Financial Inclusion Survey, Bangko Sentral ng Pilipinas noted that about 71 percent of the entire adult population was unbanked. But when the pandemic hit, there was a big jump in account ownership due to the digitization of financial transactions. Leveraging this trend, the report stated that the Central Bank aims to get at least 70 percent of the adult population to possess bank accounts by 2023.
But the question is, how can technology assist rural banks (RBs) in expanding financial inclusion? And what role does technology play in helping RBs become more agile and sustainable today and in the future?
Braving through challenges
In a virtual event last March 2022 titled “Digitalization in Rural Banking: Strategies for Financial Inclusion in the Midst of the Pandemic and Beyond,” Estrellita Ong, director of the Bankers Institute of the Philippines and chief internal auditor of BDO Unibank Inc., said that rural banks currently face numerous challenges.
“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,” Ong said.
Business innovation — a necessity to survive
To help rural banks and other financial institutions address these challenges, Nitin Vohra, director of S/4HANA Center of Excellence for SAP Asia-Pacific and Japan, discussed how technology and business innovation are changing the banking game.
Vohra noted that traditional universal banking operates on a full-service model. They provide customers with different accounts and labeled products and services, such as mortgages and credit cards. However, this model contains several providers that offer a lower price, less friction and better customer experience in the value chain. And with legacy software, competing with these providers is impossible.
“Banks should rationalize 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,” Nitin explained.
Banks could also operate as aggregators of financial services and products. “In this way, banks do not have to incur the costs of manufacturing products and services to be compliant. It also provides its customers with access to a broad range of products. On the other hand, they need to adopt a vertically integrated yet open platform to take advantage of their execution capabilities and extend their ability to offer levels of customer fulfillment. It also helps enable banks to capture the network effects and capitalize on their existing competitive advantage,” he added.
Becoming an intelligent bank
For SAP, co-presenter of the event, rural banks must transform their business and become intelligent, sustainable enterprises that consistently apply advanced technologies and best practices within agile, integrated business processes.
To help banks and financial institutions become intelligent enterprises, SAP provides integrated applications and technologies in a digital platform. Its current offerings include RISE with SAP, a Business Transformation as a Service solution that aids in ensuring transformation readiness and access to simpler support models by consolidating the solutions and services businesses require in one package.
“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.” Nitin said.
Source : From the Web