BDO Network Bank (BDONB), which was acquired by the Sy family in 2015, is hoping to tap more of the underserved market where BDO does not have branches and where BDONB can better serve the community. This strategy has allowed the rural banking arm of the Sy family to put up additional branches, which has now expanded to over 550 locations throughout the country.
During the SM Group’s Christmas party Wednesday evening held at its Ortigas-Podium head office, which was hosted by no less than SM investment Corp.’s vice chairwoman Tessie Sy-Coson and BDO president Nestor Tan, I got the chance to sit down and chat with BDONB vice chairman and president Jesus Antonio Itchon to learn more about BDONB’s goal to reach out and serve more of the underserved communities all over the country.
One area that BDONB is eyeing, Itchon revealed are the country’s tourist destinations, “many of those destinations are underserved, but have been very profitable for us. The profits are what we reinvest for expansion.”
He cited as an example the current hotspot Siargao, Moalboal in Cebu and other dive spots. In Siargao, where they have 50 automated teller machines, a recent mishap with its submarine cable and electricity problems, has left the area with only two operational ATMs, “which is paralyzing for us.”
With the influx of tourists in new tourist spots in the country, Itchon stressed the need for banking facilities to provide financial services for both the tourists in terms of accessing their funds through their digital wallets or physical transactions. The same goes for local businesses, resorts and restaurant owners, transport providers and retail establishments.
These areas, he said, are small communities that have agriculture, FMCG or fast moving consumer goods, supply trading or retail activity near the markets where traders need banking facilities.
Other far flung rural areas, “are also underserved because there’s no internet, there’s no wifi, there’s no cell signal… so how can you depend on digital banking to do financial inclusion in the provinces? Ok yon in the cities, but once you get out, there is no signal. So we need to provide physical access, you have to be there. Especially for them, if they cannot see you, how can they trust you?”
Itchon elaborated that a lot of areas remain underserved both in terms of infrastructure and banking. Thus, for BDONB, it is targeting those markets, revealing that around 40 of its bank network has to rely on Elon Musk’s Starlink to access the internet because they have no access to a landline or mobile connection, “so there are still plenty of those…we need to have the physical touch and put more people on the ground.”
That is why BDONB has been opening more branches, Itchon said,”we have to open even more branches next year.” By the end of December, he said, BDONB has opened about 70 for the whole year.”
BDONB, however, Itchon further divulged, has also encountered problems in opening branches because some of the site or building owners still have to be taught how to incorporate and establish themselves as a corporate entity that needs to be able to issue receipts and comply with all government regulations.
Thus, even BDONB’s own target to open new branches can be anywhere from 100 or even up to 400 just because of the difficulty in negotiating and convincing the possible site owners/lessors how to go about becoming a legal business entity that can issue legal receipts. As such, the process can take time and some negotiations may be abandoned if the prospective lessors are not able to comply with the process.
Itchon could not reveal exactly how much BDONB is allocating for its capital expenditure for its continuing branch network expansion, only pointing out that it is much lower than what traditional banks allocate. “A typical bank branch has about 20 to 50 people…for us, we normally have three, so we have very small branches,” he said.
Interestingly, Itchon said, an important part of a BDONB branch are its tellers who go out, usually with a belt bag and a POS terminal and with whom its customers can transact with for deposit or withdrawals using their debit cards. “Peg lang namin 5/6”… they go around doing their transactions much like the 5/6 money lenders, but of course, they do legal transactions.
The tellers are also fondly known as “Cash Agad” or “automated tao machines.” These tellers allow their clients to immediately turn around their money instead of having to go through the tedious process of regularly going to physical banks to do their transactions.
Admittedly, Itchon said, BDONB has tried to offer agri loans to farmers, “but sadly it needs more work. I have not heard of any bank, even LandBank, lending to farmers successfully…when they suffer from pests or natural calamity, or get sick, they are totally wiped out and are not able to recover.”
BDONB and the banking community are still trying to work out a system to help out farmers.
He assured that the BDO Group continues to invest …”We are investing as a group. We’re investing in building a network, we’re investing in technology, there are many investments going on, but those investments are intended to fund future growth.
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