INFRASTRUCTURE and an enduring preference for cash are holding back the financial technology (fintech) industry in the Philippines, but the tide will turn when international firms decide that the market is ready, a Visa official said Thursday.
“There’s huge potential, a few players are emerging already. There are a few established players and a few challenger brands. The turning point will be when brands outside the Philippines come into the market and that’s what we see often in many countries. It sparks competition within the industry,” Visa Head of Products and Solutions for Southeast Asia Adeline Kim said.
Ms. Kim said the fintech market is currently constrained by “infrastructure limitations” but the biggest challenge will be convincing consumers to move away from using cash.
According to the 2019 e-Conomy report released early October by Google and Temasek Holdings Pte. and Bain & Co., the internet economy in Southeast Asia is projected to grow by $100 billion this year fueled by growth in the e-commerce, online media and ride hailing sectors.
At that rate, the study is projecting growth to $300 billion by 2025. In the Philippines, it said the Internet economy accounted for 2.1% of gross domestic product (GDP) and singled out the country as having the “most room for growth.” It expects the Internet economy to be equivalent of 5.3% of GDP by 2025.
Ms. Kim said she expects Visa’s recent partnership with Razer in the prepaid e-wallet segment to open up the unbanked sector and expand financial inclusion due to the gaming firm’s established customer base.
“Cash opportunity in Southeast Asia is so huge while the banks and financial institutions were only able to cater to a certain sector of customer. Razer’s plan is to move down the pyramid and cater to a wider sector of customers,” she said.
The partnership, announced in June, involves a prepaid payment solution for countries across the region.
“Southeast Asia has a large unbanked and underserved population of over 438 million. The partnership between Razer Fintech and Visa has the potential to extend micro-financial services to this underserved segment,” the two fims said in June.
Ms. Kim said Visa’s strategy for financial inclusion is to target those “at the middle of the pyramid” first before moving to the unbanked sector at the base.
“In the past a lot of people were saying that Visa only operates and only caters to the top end of the pyramid because credit cards are not accessible to everyone and there are few credit cards. For a lot of these products we’re able to go down… to the really unbanked, but it will take time,” she said.
This month, Visa also announced a partnership with a UK fintech, Revolut, to bring the latter’s products to other countries including the Philippines.
Revolut’s products include a mobile application, currency exchange, budgeting and person-to-person (P2P) payments, to be linked to a Visa card. — Beatrice M. Laforga