Is cash still king? Decoding the perks, dangers of digital banking

Digital banking services are easy and convenient, but without proper regulation, they can lead to deeper forms of exclusion and structural problems in the economy.

Contactless transactions have seamlessly slipped into our daily routines since the pandemic, catalyzing the widespread adoption of digital payment schemes and promoting financial inclusion. The Philippines, in particular, has witnessed a surge in the adoption of digital banking. In 2020, the Bangko Sentral ng Pilipinas (BSP) found that 51 percent of the country’s adult population owned a bank account, with 25 percent of these accounts being digital. 

With the rise of credit cards, QR codes, and mobile banking applications, a cashless society seems within reach. This transformative shift can improve the country’s economic landscape. However, looming concerns on data privacy, cybersecurity threats, and financial literacy may pose obstacles. 

Financing made convenient

Currently, the Philippines has six licensed digital banks, including GoTyme, UNObank, UnionDigital Bank, Overseas Filipino Bank, Tonik Bank, and Maya Bank. Among them, GoTyme is one of the fastest-growing digital banks, garnering 2.3 million users as of January this year. 

Albert Tinio, one of GoTyme’s chief executive officers and founders, explains that the biggest benefit of digital banks is their around-the-clock accessibility. They do not need a physical store to operate, allowing customers to engage in their services through online platforms. “If you have a mobile app and a valid government ID, [you] can open a GoTyme account wherever [you] are in the Philippines,” Tinio says.

Digital banks can also be connected to other financial services like GCash and PayMaya, which adds to their convenience. Moreover, many digital banks offer direct integration with personal finance management tools, simplifying the process of tracking expenses, creating budgets, and setting financial goals. 

A form of lending called earned wage access is also made available to employees who work in partnership with certain banks. This allows workers to advance their salary for the days they hav already worked through the digital banks. GoTyme, for example, offers their employees the option to access their pay anytime. 

Digital shields

While digital banking has several benefits, it is vulnerable to cybersecurity threats such as scamming, phishing, and hacking. To counter this, Tinio emphasizes that there is no better mode of defense than prevention. On the end of the users, by being aware of online threats and implementing risk management practices, they can safely navigate the landscape of finance technologies. 

Tinio adds that digital banks must fulfill numerous requirements from the BSP to protect their customers. Aside from this, the digital bank must also answer to a privacy commission that oversees how a user’s personal data is captured, stored, and used. “We are not allowed [to operate] by the privacy commission if we do not subscribe to their requirements,” he reiterates.

GoTyme is part of an alliance called the Digital Banks Association of the Philippines, which allows digital banks to have a collective voice when speaking to the BSP about security concerns and regulations. Tinio shares that this group is also devising a mechanism that will shed light on scammer encounters to prevent similar incidents from occurring. According to Tinio, this type of cooperation is ideal for the creation of a more secure cyberspace.

His bank, in particular, also combats financial fraud by cooperating with government task forces and private entities such as ScamWatch and Whoscall, respectively. Through these organizations, they can identify potential scammers to prevent privacy breaches among users. 

Nonetheless, Tinio highlights that in spite of the many safety precautions banks take to prevent scams, cybersecurity is largely the responsibility of the user. “Phishing won’t happen if the account holder does not fall for the phishing attempt,” he explains. As such, he urges customers to be extremely vigilant about where and how they share their information. 

Breaking barriers 

Despite the great promise for financial inclusion that digital banking holds, Business World found that more than 40 percent of adults in the country still remain unbanked due to limited access to financial services in rural areas. Individuals from low-income classes also face unequal access to digital banking services because they lack digital literacy and formal credit history, which are often prerequisites for opening digital bank accounts. 

Challenges such as these could be tackled by individuals interested in a career in digital finance. For example, improving infrastructure to allow mobile banking with minimal data usage could be developed as a strategy to enhance the accessibility of digital banking services in rural areas. More digital bank companies could also look into educational campaigns to improve digital literacy in communities, offering user-friendly interfaces for their applications to cater to a wider variety of users.  

While the world of financial technology is vast, there are always individuals and groups that one can seek out to learn from experience. As long as the willingness to learn is present, Tinio believes that it will not be long before people get used to the game. “Nothing ventured, nothing gained, right? So, do try.”

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