by Emmanuel Mari K. Valdes · Published on BusinessMirror June 5, 2025
AS digital banking gains momentum in the Philippines, banks are facing a critical question: Should they continue investing in physical branches, or go all-in on digital? The answer, as with most strategic decisions, lies not at either extreme, but somewhere in between.
Digital transformation has become the rallying cry of the banking industry in recent years, accelerated further by the pandemic, which drove a massive shift toward online banking. In support of this shift, the “Digital Payment Transformation Roadmap” of the Bangko Sentral ng Pilipinas aims for at least 50 percent of retail payments be done digitally and to onboard 70 percent of Filipino adults to the formal financial system. This has spurred banks on a race to modernize mobile apps, enhance cybersecurity, and introduce seamless digital onboarding.
And yet, bank physical branches have not and will not fade into irrelevance anytime soon. In a country marked by digital inequality and diverse banking behaviors, the role of brick-and-mortar remains both relevant and strategic.
Why physical still matters
DESPITE rapid digitalization, bank branches remain vital for specific customer segments and transactions. Senior citizens and rural communities, for example, often lack access to smartphones or stable internet. For these types of depositors, visiting a branch may not just be a simple banking activity but it is part of their routine and a reassurance of safety.
Similarly, even among digitally savvy customers, there is still a strong preference for face-to-face interaction when it comes to complex financial matters like home loans, investments, or business financing. Physical bank branches are more than just transaction hubs, they serve as key relationship touchpoints where trust is built, and deeper client connections are formed.
Branches also serve an important symbolic role. For many, a bank’s physical presence in a community signifies stability, permanence, and credibility.
But digital has its edge
ON the other hand, the advantages of digital banking are undeniable. It is faster, cheaper, and scalable. Banks can serve millions of customers without the cost burden of physical premises, utilities, licenses and branch personnel.
Moreover, digital banking offers round-the-clock access and the ability to innovate rapidly, whether through AI chatbots, real-time analytics, or embedded finance solutions.
However, going fully digital is not without drawbacks. The digital divide is still a pressing reality. Many Filipinos are still unfamiliar or remain hesitant to use online banking apps. Cybersecurity threats are growing. And while AI offers efficiency, it cannot fully replace the empathy, intuition and personal touch that human advisors bring, especially when financial decisions are deeply personal.
A smart hybrid model
SO how do banks move forward?
The solution lies in designing a phygital experience, perhaps a hybrid model that integrates the best of physical and digital. This does not necessarily mean building more branches. Instead, it means optimizing branch formats to support advisory services, financial education, and high-value transactions while encouraging day-to-day banking to migrate online.
Forward-looking, banks are already repurposing branches into “experience hubs” that showcase digital tools and foster stronger client relationships. Meanwhile, they are investing in user-friendly apps, simplified onboarding journeys, and digital literacy programs to help clients transition with confidence.
In the emerging affluent and affluent segments, this hybrid approach is particularly crucial. Clients value speed and convenience but also expect personalized service and meaningful financial advice. A well-integrated branch and digital ecosystem empowers relationship managers to deliver both.
Fresh distinct departure from the traditional experience around banking
PHILIPPINE banks stand at a strategic inflection point. While digital is undoubtedly the way forward, it must be inclusive, intuitive, and anchored in trust. Physical branches are not obsolete, and they are here to stay but evolving. The banks that will thrive are those that can reimagine their networks, empower their people, and design customer journeys that meet clients wherever they are, online or offline.
The future isn’t just digital; It’s human digital.
Emmanuel Mari K. Valdes is the Head of Emerging Affluent & Affluent Market Segments, Rizal Commercial Banking Corp. and the Auditor of the Bank Marketing Association of the Philippines. He can be reached at ekvaldes@rcbc.com. The writer’s views do not necessarily reflect those of the BusinessMirror, the RCBC and the BMAP.