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Exciting digital finance opportunities in the Philippines
Large unbanked population provides ideal environment for fintech growth
16 Jul 2021 | Darryl Yu

Innovate or perish. That’s the proposition facing conventional banks over the past several years as technology adoption becomes an absolute must in the face of growing fintech competition. Within Southeast Asia, the Philippines is one key market where fintech companies are expected to grow rapidly, capitalizing on the slow innovation of most conventional banks in the country.

That’s according to a recent report from rating agency Moody’s Investors Service, which believes that the ongoing Covid-19 pandemic and the country’s vast unbanked population present an ideal environment for fintech companies to thrive and offer competitive digital financial products.

Data from UK-based research platform Merchant Machine ranked the Philippines fourth among the most unbanked countries in the world, with one of the lowest rates of card transactions globally.

Despite the unsatisfactory numbers, the Bangko Sentral ng Pilipinas (BSP), the central bank, has been proactive in improving financial inclusion in the country. It has recently launched a framework to improve access to financial services via democratized access to transaction accounts, an expanded network of low-cost financial touchpoints, and interoperable digital payments.

"Fintech companies and a new breed of digital-only banks threaten to surpass conventional banks in key retail banking areas, such as credit cards and remittances, with products that are more accessible and easier to use. The country has a large untapped market because about 70% of adults in the Philippines lack access to financial services," says Moody’s analyst Joyce Ong.

Fintechs focusing on cashless payments and remittance services for overseas workers are thriving with companies such as Mynt and PayMongo among the notable companies in this space. Other fintech companies such as FinScore are addressing the financial inclusion issue by helping unbanked individuals get appropriate financing through the use of telecoms data.

Foreign banks such as ING and CIMB have made forays into the market, offering fully digital services for Filipinos and enticing them with higher deposit rates and better customer experience. Moreover, some local banks such as UnionBank of the Philippines have made impressive strides in revamping their technology stack to cater to the growing needs of both retail and institutional clients. UnionBank has been one of the most active local banks looking at blockchain technology and last year helped the country’s Bureau of the Treasury issue a digital bond alongside fintech partner Philippine Digital Asset Exchange (PDAX).

Yet, despite the huge growth potential of fintechs in the Philippines, the market remains at its infancy, according to an analysis by rating agency Fitch Solutions which cites the country’s underdeveloped digital infrastructure as a major hurdle to further fintech development.

Figures from The Speedtest Global Index last November revealed that the Philippines had the second worst internet speed in Southeast Asia and was ranked 110th out of 139 evaluated countries and territories globally.  

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