Filipinos Most Stressed And Anxious About Debt In Asia Pacific Region – Study
Based on data, 70% of banking customers in the Philippines said they were struggling to manage their debt and it is their “top challenge” when it comes to their finances.
Filipinos are the most stressed people about their current financial situation in the Asia Pacific (APAC) region amid the current pandemic, according to a study.
Data from Forrester Consulting— commissioned by Backbase, a banking software solution company— revealed that 70% of banking customers in the Philippines said they were struggling to manage their debt and it is their “top challenge” when it comes to their finances.
Among the 21 member countries in the region, the study showed that Filipinos also feel more anxious and uncertain about their finances and one source of this anxiety is debt.
According to Backbase, household debt in the Philippines is at a near-record of over P2 trillion.
“Our research showed that managing debt was the main concern of Filipinos; more so than the rest of APAC,” Backbase regional vice president for the Asia Pacific Iman Ghodosi said.
The report bared that 67% of their respondents said they feel overwhelmed by debt, while 60% said it negatively impacts their abilities to pay bills that leads them to more debt.
Based on the study, 63% of banking consumers also said “debt makes building savings difficult.”
To address debt, Ghodosi emphasized that banks in the country must now advance their digital technology – by simplifying financial wellness and offering money management tools.
These innovations include a range of new tools including spending analysis, scheduling of bill payments, automatic debt repayments, budgeting, and more, delivered directly into their customer’s pocket via a smartphone app.
Ghodosi stressed that through advancements in digital technology, banks could offer digital services that could help consumers manage their crippling debt.
Ghodosi said “we’ve entered” the engagement banking era, an evolution that stresses a one unified platform approach for banking. “The number one priority in this new era is to completely re-architect the bank around the customer, moving away from siloed technology investments,” he pointed out.
The study revealed that the retail banking sector knows this and is pressing forward with financial wellness and money management app development.
About 80% of the Filipino retail banking business decision-makers interviewed said their companies are “planning to” or “actively expanding” its financial wellness initiatives while 48% of the respondents said it was of “critical priority.”
When asked about spending on digital financial wellness tools, 52% of the respondents said their companies plan to spend more over the next 12 months.
Riddhi Dutta, regional sales director for Association of Southeast Asian Nations and South Asia at Backbase, said it is fairly normal to have some challenges at this stage of technological adoption but he emphasized that they need to be addressed.
“We have seen many banks around the world face similar challenges at some point in their journey. Change is not easy. However, for those institutions who want to take the lead, the slowness of some players is definitely an opportunity for others,” Dutta said.
Customers will be the winners
Dutta said new apps, will increase levels of financial literacy and help manage debt. “Financial lives will be improved.”
“We see a future not far from now when financial wellness and money management apps will be the primary interface between financial intuitions and their customers and managing debt will be far easier,” Dutta said.
“Technology now allows banks to better meet the needs of their customers, and the future for everyone looks very bright,” he noted.
Low trust in digital banking
Despite many banks in the world, including the Philippines, already transitioned to digital banking following the global trend, research also showed that trust in digital banks is low with only 18% of respondents saying they trust a digital bank, compared to 60% for a traditional bank.
“Lower trust in new ways of doing this is to be expected. However, we have seen around the world that the more information and control we can put into the hands of customers to make their own informed financial choices, the more they will trust the organizations providing them with this opportunity,” Ghodosi said.
He explained that digital banks could address the trust issues by building out that interface and offering more tools through technology as 68% of the country’s population use their smartphones for banking.
Difficult to keep up
Although consumer expectations and the banking landscape are constantly evolving, Backbase found out that many banks in the Philippines said they find it difficult to keep up with progress and meet new demands.
It showed that 70% of the respondents said it is a key challenge to keep pace with customer expectations and remain both profitable and relevant.
The increased competition and/or disruption from new industry entrants is another major challenge, according to their study.
Filipino banks, the research said, should follow the example of banks in other countries and learn from global experience to stay ahead.
The top three challenges in the financial institutions identified by respondents are organizational silos (78%), competing for priorities (74%), and a limited view of customer data (74%).
To tackle these challenges, the study said banking leaders should take steps to transform their banks by building digital cultures and investing in technology that can remove silos and encourage open finance.
“[About] 62% of banks acknowledge that financial literacy tools are critical/ important to drive business outcomes such as customer acquisition, engagement, retention, and loyalty. And 60% of banks plan to implement digital money management tools in the next 12 months,” it said.