THE COUNTRY’S unbanked is expected to be reduced to 20% of the population in five years’ time from the more than half that have yet to open accounts with financial institutions, according to a study.
A report by software firm Backbase and market research firm International Data Corp. (IDC) titled “Fintech and Digital Banking 2025 Asia Pacific” said financial technology firms or fintechs will help fill the inclusion gap in the Philippines.
“Unbanked and underbanked segments in the Philippines are expected to cut by half to around 20% of the bankable population [by 2025],” the report said.
2017 data from the World Bank showed only 34.6% of adult Filipinos have formal bank accounts. The Bangko Sentral ng Pilipinas (BSP) wants to raise this to 70% by 2023.
The study showed more Filipinos will be keen on digital financial transactions by 2025, with 75% of total payments expected to be done electronically and with 80% of customers seen registering new accounts with institutions other than their primary banks.
“Today, incumbent banks across Asia Pacific are faced with the pressing need to up the ante on digital-first banking due to intensified customers’ need for availability, access, and control of digital channel interactions,” the report said.
The volume of electronic payments in the country increased to comprise 10% of total transactions in 2018 from a mere 1% in 2013, according to a study by Better-than-Cash Alliance. Meanwhile, the value of e-payments rose to 20% of the total in 2018 from the 8% seen in 2013.
BSP Governor Benjamin E. Diokno wants 20% of the transactions done digitally by the end of this year.
Meanwhile, restrictions on physical movement caused by the coronavirus disease 2019 (COVID-19) has opened up opportunities for the fintech sector as more businesses look to digitize in order to keep their operations moving, according to an official from a global fintech company.
This is evident in the pickup in the use of digital banking services during the enhanced community quarantine (ECQ), according to Frederic Ho, vice-president for Asia and the Pacific at US-headquartered payments firm Jumio Corp.
“Key operations such as remittances and money transfers, food deliveries, and any other business function that can no longer depend on a physical presence to interact with customers are now going digital,” Mr. Ho said in an e-mailed response on Friday.
Jumio’s Mr. Ho said fintechs’ growth in the country has been strengthened by the increase in digital activities during this crisis.
“There is an opportunity to further solidify trust and confidence among Filipinos in fintech by pushing for bolstered security practices within the segment to ensure protection against sophisticated online fraud and data privacy compliance,” he said.
The Department of Trade and Industry has said fintech transactions in the Philippines are seen rising to $10.5 billion by 2022 from the $5.7 billion logged in 2018. — L.W.T. Noble