FINANCE | Philippine banks face more complex risks as digitalization accelerates
The roundtable forum brought together executives from banks, capital markets, technology and cybersecurity sectors at the Asian Institute of Management Conference Center.
The Philippine banking sector is facing a more complex operating environment as economic shocks, digitalization, cybersecurity threats and changing customer expectations converge, banking and finance executives said at a recent executive roundtable hosted by The Manila Times.
The discussion, titled “The New Banking Reality: How Financial Institutions Are Navigating Economic Uncertainty While Supporting Growth,” brought together executives from banks, capital markets, technology and cybersecurity sectors at the Asian Institute of Management Conference Center.
The Manila Times CEO Anna-Marie Ang-Thompson said the domestic banking sector had continued to expand despite global economic headwinds, with total assets exceeding P30.4 trillion.
“The question before us is not whether Philippine banks can grow; the question is how we sustain that momentum while navigating new technologies, evolving risks, and shifting expectations,” Ang-Thompson said.
She said artificial intelligence was moving from experimentation into frontline banking operations, including fraud detection and credit scoring, while digital capability was becoming part of the core architecture of financial services.
Alvin Arogo, chief economist and head of the research division at Philippine National Bank, said the current environment was marked by more frequent and overlapping economic shocks.
“So, from a macroeconomic perspective, the new banking reality is an environment where shocks, as we’ve seen, occur more frequently, transmit more rapidly, and increasingly overlap,” Arogo said.
He cited geopolitical tensions, changing global trade policies, climate-related disruptions, loss of public trust and the pandemic as shocks that had affected output, prices and the cost of capital.
Arogo said inflation pressures were showing signs of moderation, although they remained above the Bangko Sentral ng Pilipinas’ target. He also pointed to exports and business sentiment as bright spots even as economic growth weakened.
GDP growth slowed to 2.3% in the second quarter, while total capital formation or investments contracted by 9%, according to figures cited in his presentation.
Arogo said the country’s move into the upper-middle-income category could create new opportunities but would also raise expectations.
“Finance must increasingly support productive capacity, innovation, infrastructure, and business expansion, rather than simply moving with the economic cycle,” he said.
Carlo Lazatin, president of the Financial Executives Institute of the Philippines, said the changes affecting banks were part of a broader transformation across the financial system.
“We are seeing AI, digital banking, e-KYC, cloud technology, APIs, QR payments, embedded finance, even cybersecurity, uh and many others that uh Rey will tell us about later—becoming part of how financial institutions now operate,” Lazatin said.
“These are no longer developments, uh as we had seen in the past, uh that we were preparing for, but these are the new realities today,” he said.
Lazatin said the increasing use of AI also elevated technology into a governance issue because financial institutions were using the technology in areas such as credit decisions, fraud detection, customer behavior analysis and personal data management.
“Once technology begins influencing credit decisions, fraud detection, customer behavior, and how personal data is used, AI stops being purely an IT issue. It becomes a leadership and governance issue,” he said.
He also stressed that resilience should be built before a crisis rather than during one.
“I believe resilience is built in good times, so institutions still have choice during difficult times,” Lazatin said.
For BDO Capital & Investment Corp. President Eduardo Francisco, infrastructure and energy remained important areas for investment, although private-sector activity was carrying much of the infrastructure expansion.
He gave energy three stars, citing growing interest from local and foreign investors, particularly in solar and wind projects. Digital infrastructure, however, received one star from a financing perspective because many companies were already undertaking digital transformation as part of their own strategic needs.
Francisco said the financial system had sufficient liquidity, but businesses were not generating enough demand for financing.
“So, the supply is there, but there’s not enough demand, you know?” he said.
He also said Philippine IPO activity was lagging other markets, while preferred shares and bonds continued to attract investors.
Emilio “Jun” Neri Jr., senior vice president and lead economist of Bank of the Philippine Islands, said banks were responding to the more difficult environment by strengthening their balance sheets.
“We are fortifying our resources today to guarantee stability tomorrow,” Neri said.
He said BPI’s lower first-half net income was due to higher loan-loss provisions rather than weaker business volume or narrower interest margins.
Neri also identified renewable energy, economic zones, electronics and education as areas where the bank saw opportunities.
Cybersecurity emerged as another major concern as banks and consumers moved further into digital channels.
Mel Migriño, country head of Gogolook Philippines and president and chairperson of the Women in Security Alliance Philippines, said digital transformation was creating a corresponding need to strengthen digital trust.
“Admittedly, amidst the digital transformation, there is always a compromise. There is an always a compromise of your digital trust, right? And this compromise, I would want to zero in on the perspective of scams, fraud, and deepfakes,” Migriño said.
She said AI-powered bot calls, voice cloning and deepfakes were contributing to the proliferation of scams.
Migriño said the private sector also needed to work with government agencies and financial institutions to strengthen consumer protection and anti-scam capabilities.
She said she was helping the national government establish the National Anti-Scam Hub, or NAS.
“With the National Anti-Scam Hub, this is where uh this is where all the faces in terms of the scam life cycle—starting from identification, detection, protection, safeguarding, and recovery—actually happens,” she said.
Sheila Vasquez, representing the Philippine Institute of Cybersecurity Professionals, said smaller banks and financial institutions faced a particular challenge because digitalization was bringing underserved communities into online financial channels.
“As smaller and specialized banks, like thrift and rural banks, push digital transformation forward, they aren’t just opening accounts or creating new revenue streams. They are asking our rural communities, our MSMEs, our seniors, and even OFWs to trust digital channels,” Vasquez said.
She also warned that the financial sector should begin preparing for post-quantum cryptography, saying existing cryptographic systems could eventually be vulnerable to sufficiently powerful quantum computers.
Meanwhile, Rio Mayuga, country head of clients at Visa Philippines, said payment technology was rapidly changing as consumers shifted from physical cards to mobile phones and wearable devices.
“The term “card” will soon be outdated, because as you know, the way that people pay these days or what we call the form factor, is fast-changing,” Mayuga said.
He cited Apple Pay, Garmin Pay and Google Pay as examples of the shift toward mobile payments.
Mayuga said expanding digital payments also meant making them accessible to smaller merchants, including microentrepreneurs and sari-sari stores.
“It’s not just growing the people who will pay, but it’s growing the entire ecosystem that will also accept these non-cash payments,” he said.
The discussions underscored a common challenge for the financial sector: maintaining growth while strengthening governance, cybersecurity, resilience and public trust as technology changes the way banks and customers operate.
Full disclosure: All news articles published on the TechSabado website are written by human journalists, unless otherwise specified. Final text editing is also performed by human editors, with artificial intelligence (AI) used only to assist with additional grammar and style guide corrections..
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