Banks see higher loan demand in Q1

Banks expect higher loan demand from companies and households this quarter after a series of interest rate cuts done by the Bangko Sentral ng Pilipinas (BSP) last year. 

Based on the results of the BSP’s fourth quarter 2024 Senior Bank Loan Officers’ Survey (SLOS), most respondent banks projected a net increase in overall demand for loans from businesses in the first quarter.

The increase was due to higher customer inventory financing needs, clients’ more optimistic economic expectations and an increase in borrowers’ short-term financing needs.

Likewise, there was also a net increase in overall credit demand from consumers as anticipated by surveyed banks in the current quarter amid rising consumption and banks’ more favorable credit terms.

The SLOS consists of questions on loan officers’ perceptions relating to the overall credit standards of their respective banks, as well as to factors affecting the supply of and demand for loans to both enterprises and households.  

For the fourth quarter alone, the survey indicated a net rise in overall loan demand from firms, but slightly lower than the previous quarter. The increase was also driven by inventory financing needs, optimistic economic outlook and rise in borrowers’ short-term financing needs.

Meanwhile, the diffusion index approach indicated a lower net rise in demand for household loans in the fourth quarter last year compared to the previous quarter.

“The overall increase in household loan demand was mainly due to banks’ more attractive financing terms and higher consumption,” the BSP said.  

This is despite the tighter lending standards for enterprises from October to December and unchanged standards for consumer loans.

“The diffusion index approach indicated a net tightening of credit standards in the fourth quarter of 2024, due to the deterioration in borrowers’ profiles and the profitability of the bank’s portfolio,” the BSP said. 

On the other hand, the broadly steady loan standards for households were mainly due to the unchanged profile of borrowers, tolerance for risk and the profitability of the bank’s portfolio.

Source: Philstar

Can the Philippines keep its title as contact center capital of the world?

The Philippines continues to be the global leader in the contact center industry, and if the country wants to retain this position for the next 10 years, urgently modernizing processes with the use of generative artificial intelligence (AI) and data is key.

According to IDC, generative AI spending in the Asia-Pacific (APAC) region alone is projected to reach $26 billion by 2027. This includes AI investments in customer engagement as businesses seek to remodel their operations around creating delightful customer experiences at every touchpoint.

In the Philippines, a 2024 IT & Business Process Association of the Philippines (IBPAP) survey reported that 67% of IT and business process management (IT-BPM) firms, the sector that includes contact center companies, are already leveraging AI in their operations, focusing on customer service, data entry, and quality assurance.

However, while AI use cases in customer experience are increasing, traditional contact centers still struggle to meet the evolving expectations for personalized, omnichannel interactions. Amid shifting customer demands, contact centers need to transcend inefficient legacy systems and overcome integration challenges to gain a competitive edge in the age of AI.

By embracing advanced technologies and improving system interoperability, they can better cater to modern customers and enhance overall service quality.

THE STRATEGIC BENEFITS OF MODERNIZING

Utilizing real-time customer data and advanced language models can address operational inefficiencies in contact centers and improve agent experiences. Modernizing contact centers through cloud-native architecture can facilitate the delivery of better customer service at a lower cost and help businesses transition from outdated systems to more advanced ones.

With 43% of APAC consumers expecting a response within an hour, according to Twilio’s 2024 Consumer Preferences Report, streamlined processes and unified customer data can lead to faster responses and solutions. Customers do not have to go through the hassle of repeating their problems or waiting on operators to locate their information.

Insights drawn from unified data, including customer history, conversational insights, preferences, and AI-derived traits such as sentiment, predicted lifetime value (LTV), and churn propensity, can also create highly contextualized and personalized interactions, which can keep customers happier and translate to greater loyalty and customer LTV for the business.

Businesses and agents also stand to gain. Reduced instances of app switching, better access to recommended responses, and automated wrap-up reports can enhance overall productivity. This approach addresses issues such as long waiting times, repeat calls, and high transfer rates, ultimately leading to service and operational performance improvements. Businesses can streamline operations further using predictive analytics, which reduces workload and search time for agents.

THE NEXT RACE: EMBEDDING CDP DATA INTO THE CONTACT CENTER TO EMPOWER AGENTS

Harnessing the potential of first-party data, which is customer data directly collected and owned by the organization doing business with them, and empowering agents is essential for modernizing contact centers. Collecting first-party data from various sources and integrating it into real-time service interactions can provide agents with more comprehensive information than traditional customer relationship management (CRM) systems. Using a customer data platform (CDP) alongside CRM can help contact centers better understand customer behaviors.

Leaders in customer experience can rely on CDP data because it offers real-time insights and supports the shift towards omnichannel. The real-time nature of CDP data allows leaders to respond swiftly to customer needs and preferences as they arise.

CDPs’ ability to consolidate data from billing systems, data warehouses, and marketing automation platforms also makes it easier to transition across channels without losing context or information.

With the emergence of newer large language models and the memory capabilities of CDPs, agents now have access to personalized assistance during customer conversations. This development changes the traditional approach to agent training.

Lengthy training sessions confined to a classroom setting, which also incur additional costs, are less necessary. Instead, agents can engage with customers more proactively, knowing that their AI assistant can help with complex scenarios that may arise occasionally.

NAVIGATING TRANSFORMATION AMIDST FILIPINO CONSUMERS’ PRIVACY EXPECTATIONS

As with every new technology, businesses need to be mindful of using AI safely to harness customer data and build transparent and trustworthy systems. According to Twilio’s recent State of Customer Engagement Report, 41% of businesses in the Philippines consider protecting customer data their most pressing challenge. Shortage of labor and navigating the complexity of regulations were also identified as top challenges.

Incorporating privacy and security features and principles into the development lifecycle of new technologies can support the compliant and responsible use of customer data. The report also found that the majority (77%) would trust a brand more if it disclosed how customer data is used in AI-driven interactions. Additionally, three in four Filipino consumers ranked transparent communications such as clear terms and conditions, return policies, ease of reaching customer support, and responsive customer service, as the most effective ways to maintain trust.

As customer expectations and business needs evolve, traditional contact centers must also keep up with the times. Improving customer experience requires adopting modern technologies that ensure data protection, improved response times, and transparency.

This shift involves moving away from outdated models and implementing scalable solutions that can meet business needs. Modern contact centers should be capable of rapidly adapting to changes and providing excellent customer service.

Source: Business World

Navigating the US Economic and Real Estate Transition

This year is set to be a turning point for commercial property markets in the US. A gradual easing in inflationary pressures alongside a steady, if unspectacular, year for GDP and employment growth should help to ease the market through the final leg of the post-COVID adjustment.

We shall delve into four areas which are likely to have a bearing on returns, funding markets and the differing demand by property types.

Can we expect rate cuts in 2024?

Despite current speculations and recent inflation showing a modest re-acceleration, as well as growth in the economy remaining resilient despite higher interest rates, we don’t think it likely that the Fed will refrain from cutting rates until next year.

Global supply chains continue to normalize and remain consistent with ongoing goods price disinflation, at least for the next few months. Commodity prices also seem to have settled at higher levels, implying falling inflation, and although consumer prices are concentrated in the service sector are rising, recent surges in productivity and declining wage growth point to lower services price inflation ahead.

Considering the expectation of returning to 2% inflation, three reasons support the potential for the Fed to cut rates.

Firstly, the time for monetary policy to impact the real economy has lengthened, necessitating prompt easing to prevent further economic slowdown and potential undershooting of the inflation target.

Secondly, even if the Fed reduces rates by 75 basis points this year, monetary policy would remain restrictive, above levels considered neutral. Thirdly, the substantial reduction in fiscal policy stimulus compared to the previous year is anticipated in 2024, potentially facilitating the Fed’s control over inflation.

Can AI lift the long-term outlook?

The US is likely to be at the forefront of adoption of Generative AI, and it will drive a wedge between real estate returns and economic growth. The economic gains will come slowly over the next decade, and it could significantly raise the outlook for US GDP, but this will be driven by productivity rather than employment.

This growth will be accompanied by a reduction in demand for some types of space ¬– most notably office, but also life sciences and manufacturing as these areas have the highest exposure to generative AI.

Is globalisation over?

Although geopolitics may seem somewhat academic in the highly localised world of real estate, the magnitude of changes to domestic and international politics make it a factor shaping the outlook for real estate markets.

US and China decoupling is shaping domestic policies. Regardless of the outcome, the upcoming presidential election is likely to shape US domestic policies (through subsidies or tariffs) to see increased demand for industrial space as it seeks to replace parts of the global supply chain, with foreign investment into US real estate set to remain weak.

Is it a new era for inflation and rates?

A persistently higher inflation regime would have profound impacts on real estate returns as well as other asset classes and the relationships between them. Currently financial markets are pricing in approximately a 30% chance that inflation will still be 3% or above in 5 years’ time but we think those odds are too high because a high proportion of the recent surge in inflation can be explained by excess demand.

But we are more cautious when it comes to the volatility of inflation. The pre-pandemic economy was unusual for its low and stable inflation rate, with the 20 years leading up to the pandemic being the lowest and most stable periods of inflation over the past 700 years. Whilst the simple law of averages would suggest the future is set to be more volatile, geopolitics and the disruptive influence of generative AI also point in that direction. And if we do see more volatility, we expect central banks to react more swiftly to nascent signs of inflation in the future.

The recent collapse of the Baltimore Key Bridge is another reminder of how adverse supply shocks can also become more frequent as narrowing global supply chains place more emphasis on key assets.

The key lesson for real estate markets is that interest rates may be more volatile in the future.

Source: Oxford Economics