SMALLER BANKS must collaborate with financial technology (fintech) companies or bigger lenders to ensure that they can keep up with emerging digital trends.

“If you want to survive, collaborate and not isolate. If you really want to survive as a smaller bank, there are a lot of companies that you can collaborate with. Just be open to their ideas. Of course, the cost will be high on the initial stage, but why not pay the cost if you want to survive?” Bank of the Philippine Islands (BPI) Transactional Banking Head Edgardo R. Marcelo, Jr. said during the “Empowering Philippines’ Finance: AI Innovations for a Digital Future” conference on Thursday. The event was hosted by Microsoft Philippines and AND Solutions, a subsidiary of fintech company AND Global.

Mr. Marcelo said BPI was previously cautious about partnering with fintechs, but is now more open to the idea as these firms have been able to help the bank innovate faster compared with building everything in-house.

“Before, we wanted to ignore fintechs. We acknowledge right now in the banking industry that some of the core pieces of the bank are experts, but some honestly are not — and that’s where the fintechs can come in… In BPI right now, we’re very open to collaboration. So, if that provider or that aggregator or fintech has that capability, we go to them,” he said.

There are a wide range of fintechs that offer different services that small banks can tap as needed, he said.

For his part, mindox.ai Chief Executive Officer and Founder Baasandorj Davaasuren said banks should be selective about which fintechs to partner with and choose those that can help fulfill their business needs to avoid unnecessary costs.

“You don’t have to buy the best one, but get the best software that suits your actual business needs itself. You don’t need to deploy 20 different products within one quarter,” he said.

“And to be honest with you, the owners, executives, and board don’t want you to be burning money for software, so I guess the more realistic way to move forward is in steps, not jumps,” he added.

Financial institutions should not be afraid to tap emerging technologies as prices of these products have gone down amid increased availability, Esquire Financing, Inc. Chief Technology Officer (CTO) and Chief Trust Officer Stephen Williams said.

“What needs to change in financial institutions is the appetite to take risks, and the appetite to be accountable. With those two things, you need one more, which is the mandate to experiment,” Mr. Williams said.

“So, the advantage for AI (artificial intelligence) and ML (machine learning) and how affordable technology really is today is you can do these with your budgets confidently with less risk than anyone could 20 years ago,” he added. “If it’s too much, then BSP (Bangko Sentral ng Pilipinas), International Monetary Fund, and Asian Development Bank are all looking to support the small financial institutions.”

Microsoft Philippines CTO Lope Doromal, Jr. said it is now easier for businesses to build scale amid improved technologies, especially when compared to those available years ago.

“With the state of technology today, it’s easy to start small and it’s easy to scale from starting small. But just keep in mind that the experiment has to go into production at some point. It has to scale at some point,” he said. — A.M.C. Sy