By Bjorn Biel M. Beltran, Special Features and Content Assistant Editor
In an increasingly digital world, it becomes ever more apparent how large a role the financial sector must play in building a more resilient future. The financial sector, as one of the world’s largest and most prominent industries, has the ability to direct resources toward environmentally and socially responsible investments.
In the panel on “Building and Expanding a Sustainable Digital Finance Ecosystem,” experts and financial industry leaders at the 2023 BusinessWorld Economic Forum held last May 25 attempted to reimagine the sector in a world where the barriers of the physical and the digital have begun to blur.
Eric Roberto M. Luchangco, chief finance officer and chief sustainability officer of the Bank of the Philippine Islands (BPI), enumerated the obvious benefits of the sweeping digitalization of banks all over the country.
It’s critical for us in the finance industry, not only to help finance, but to understand what are the kinds of projects that we should be encouraging our customers to support.
— ERIC ROBERTO M. LUCHANGCO, Chief Finance Officer and Chief Sustainability Officer, BANK OF THE PHILIPPINE ISLANDS
“For us, this was really an opportunity for us to make things more convenient for customers; and that has a lot of savings for them. There’s no need to travel to the branches. They can transact whenever they want to,” he said.
“We’re very close to 3,000,000 customers now that are digital customers, meaning they transact with us more digitally than they do non-digitally; and those are financial transactions where there’s actual movement of money. As a result, we’re seeing much better engagement with them.”
Mr. Luchangco said that this serves as an illustration of how the banking industry’s revenues are starting to move in favor of the digital customers and of how banks like BPI have been quite successful in migrating their existing customers to the digital space.
It follows then that the financial sector’s growth and stability depend on the development of a sustainable digital finance ecosystem. But, how does the Philippine financial industry achieve that goal?
In a global context, investors are increasingly valuing sustainability and demanding transparency and responsibility from corporations driving growth in the field of sustainable finance. Environmental, social, and governance (ESG) considerations are becoming requirements in making investment decisions.
Having been in business for over a century in the Philippines and given the long-term nature of the insurance business, Sun Life holds sustainability as a high priority, according to Gaurav Mishra, chief operations and digital enterprise officer at Sun Life Philippines.
The financial industry plays a huge role in sustainability… Digital is a key enabler to this because it makes products more accessible, and it allows us to provide a better end-to-end experience.
— GAURAV MISHRA, Chief Operations & Digital Enterprise Officer, SUN LIFE PHILIPPINES
“The concept is very familiar with us; and we understand the importance of staying in committed to our cause and seeing it through amid various challenges,” he said.
Mr. Mishra shared Sun Life’s five focus areas for pursuing for sustainability in its business: increasing financial security; fostering healthier lives; advancing sustainable investing; operating as a trusted and responsible business; and uplifting the communities in which they operate. He added that each of these focus areas supports at least one of the United Nations’ Sustainable Development Goals.
“In this journey, collaboration has been key for us. Internally, we work with our employees to create relevant solutions and redesign processes; while our advisors operate at the front end, engaging with our clients,” he said.
“At the same time, we also align with our initiatives and the sustainability vision which complements these initiatives. And as we work through, we bring more value to the people we serve and at the same time strengthen the country’s financial ecosystem.”
Digital technology, particularly emerging technologies like blockchain, can become the catalyst of change in the financial landscape. Kenneth Stern, general manager of Binance Philippines, said that a country like the Philippines that has a very young demographic, high internet usage, high mobile phone understanding and a burgeoning digital economy that is looking for investments has a lot of potential to uplift the lives of its citizens through technology.
Web3 opens up opportunities in the Philippines for more financial inclusion and for skilled Filipinos to work remotely for global companies without having to leave their families.
— KENNETH STERN, General Manager, BINANCE PHILIPPINES
There are three specific areas, Mr. Stern said, in which digital technology can propel the country towards a more sustainable future: financial inclusion, remittances, and job creation.
“Financial inclusion is very important here because it’s still 34 million people in the Philippines who are not financially included, and there’s a lot of technology out there that can help people get financially included. But there is trouble with education, with logistics, and with how we can actually give access to these people,” he said.
Technologies like cryptocurrency and other forms of digital money can also help Overseas Filipino Workers (OFWs) send remittances more cheaply, which can mean a lot for Filipino families struggling with poverty.
“More OFWs can invest back to the Philippine market. It’s roughly 10% of [gross domestic product], but I feel like if we can use cryptocurrency and digital technology, we can increase that number up to 20% to 30%,” Mr. Stern said.
Finally, Mr. Stern said that digital technology can help eliminate the “brain drain” that has happened in the country, “where our best talent do not need to leave the Philippines to go to the US or Canada or Europe to make international salaries.”
A mosaic of solutions
“Sustainability is a huge subject, and there are many facets of it,” Federico P. Tancongco, senior vice-president and chief compliance officer of BDO Unibank, pointed out.
Mr. Tancongco said that at BDO, they impose three disciplines on themselves when creating new products for their customers.
Financial inclusion for us is phygital — both physical and digital… To really serve the underserved, we believe it is still a physical world. We are at a transition. We are still learning.
— FEDERICO P. TANCONGCO, Senior Vice-President & Chief Compliance Officer, BDO
“One, you do not develop products in an ivory tower. While you can see in articles emerging theories and trends, we also leverage heavily on our experience with our clients and our understanding of their context, the clients that we serve and the clients we want to serve,” he said.
“The second discipline is that we cannot be everything to everybody. We have to focus on what we are good at, and then we leverage on what we understand. Third, we have to respect and leverage the insight of the other players, because in sustainability, no one institution, no one industry can solve all of the problems. We will contribute to a mosaic of the solutions, and we have to understand and respect the solutions that are coming out in the market.”
The panel also noted that collaboration and the leveraging of new technologies like blockchain can enhance transparency, reduce costs, and improve efficiency in the financial industry of tomorrow. Furthermore, digital technology can facilitate sustainable investments, promote financial inclusion, and build a more resilient and equitable financial system that works for everyone.
Mr. Stern of Binance Philippines pointed out that technology can create possible solutions to many problems, from decreasing friction, to increasing efficiencies, to creating cross-border transactions real time.
“These are all real solutions that are being made right now. It’s all about getting the buy-in from these companies and large institutions to actually invest in the product, invest in the technology and actually put some initiatives behind these present projects and try it out,” he said.
Mr. Tancongco agrees. “Business moves where money is. If you put rules into lending and you use ESG criteria when you lend, when you issue bonds, or use ESG criteria whenever you make your investments,” he said.
“The principle is biblical, ‘Where your treasure is, there will your heart be also.’ Put the money there, and everybody else flocks to where the money is. In other words, actually like during the pandemic, the role of financial institution is mission-critical.”
BPI’s Mr. Luchangco echoed the sentiment, adding that the financial industry has the responsibility of keeping updated with the latest sustainability trends so that it can make better investment decisions.
“This is really driven by money, right? And a lot of the sustainability initiatives, they do require financing. That’s a critical way in which the financial sector can really help. I think it’s critical for us in the finance industry, not only to help finance, but to be on the cutting edge and understand what kinds of projects we should be encouraging our customers to support.”
“It’s our belief that every individual, every company and every country in fact needs to play its part in driving the transition to a more carbon-neutral economy,” Mr. Mishra of Sun Life concluded.
“Digital is a key enabler to this because it makes products and services easily accessible to our clients. It allows our employees and our advisors to engage with the clients and support their requirements remotely; and it also allows us to offer a very seamless end-to-end experience. I think we do have a big role to play in ensuring sustainability.”