Philippine fintech industry’s growth limited by infrastructure gaps — report

THE PHILIPPINES’ financial technology (fintech) ecosystem’s growth is constrained by the lack of supporting infrastructure despite robust demand for digital transactions, according to a report by venture capital firm Kaya Founders.

The country’s fintech space is “over-distributed and under-infrastructured” despite the rapid adoption of online payment services, especially at the app layer, it said in its “The Philippine Fintech Stack” report released on Monday.

“Applications have scaled quickly, but the shared rails beneath them — identity, banking, payments, and credit data and consent frameworks — remain fragmented,” it said. “The Philippines has proven demand. What will determine whether growth compounds or plateaus is infrastructure efficiency — lower onboarding costs, better underwriting visibility, cheaper settlement, and interoperable data standards.”

“Digital finance in the Philippines has reached meaningful scale. The constraint now is not innovation at the app layer, but coordination at the infrastructure layer. Where identity is portable, payments are cheap, and data can move securely, financial inclusion becomes economically sustainable,” said Connor Wen, the report’s author and a collaborator with Kaya Founders.

Fintech adoption in the Philippines has continued to grow, backed by high levels of smartphone ownership, declining cellular data costs, and the shift in consumer behavior and preference triggered by the coronavirus pandemic, the report said. This has led to massive use of digital financial channels like e-wallets, digital banks, online lending platforms, and remittance apps, which has also driven investments in these products.

“But they all rely on infrastructure that has changed little underneath. Without cheaper payment rails, reliable identity verification, or interoperable data standards, these expansions will hit natural limits of cost and risk,” it said.

“Investment has flowed disproportionately to application layer companies — wallets, digital banks, and consumer lending platforms… Meanwhile, infrastructure startups have attracted only a fraction of this capital to date.”

The report said that poor credit data infrastructure is a key constraint as this affects underwriting, keeping lending costly and difficult to scale.

It added that while real-time payments in the Philippines have continued to increase at the individual level, merchant adoption remains limited and business-to-business (B2B) payments are still dominated by checks.

“When real-time payments are costly, rigid, and inconsistently interoperable, users and merchants limit usage to basic transfers. Indeed, this seems to be the reality today. One of the major use cases of InstaPay today is to top up users’ own e-money wallets. That is, the sole real-time payments switch is largely being utilized by users to transfer funds to themselves, instead of for payments,” the report said. “Until rails support cheaper, richer flows — subscriptions, B2B settlement, automation — payments will scale in volume without transforming commerce.”

Formal banking also remains limited even as the adoption of e-wallets has increased, it added, which shows that the population is digitally active yet “financially shallow.”

“Many users transact digitally, yet remain outside the core financial system. In fact, the data suggests that Filipinos are abandoning their bank accounts in favor of e-money, with transaction account utility seemingly shifting to payments from savings,” it said.

“E-money lowers payment friction but does not build durable financial standing. Credit histories are thin, KYC (know-your-customer) is not universally portable, and legal protections are limited. As a result, digital activity rarely translates into formal financial inclusion. Without formal accounts, users struggle to accumulate creditworthiness, access larger-ticket loans, or participate fully in savings and investment products.”

In 2024, online payments made up 57.4% of retail transactions by volume and 59% by value, according to the Bangko Sentral ng Pilipinas’ 2024 Status of Digital Payments in the Philippines report. These were up from 52.8% and 55.3%, respectively, in 2023.

However, the World Bank’s Global Findex Database 2025 report showed that 50.2% of approximately 82 million Filipinos aged 15 years old and above had financial accounts in 2024, lower than the 51.4% recorded in 2021 but higher than 26.6% in 2011.

The data showed that 33.5% of Filipino adults had accounts with banks or similar formal financial institutions, while 28.8% had mobile money accounts. Some 32.7% said they had digitally enabled accounts, or those used with a card or phone.

The continued growth in apps will result in wider fintech infrastructure gaps, the Kaya Founders report said.

“This imbalance compounds over time… More users, transactions, and products are pushed through the same thin rails — amplifying fraud exposure, increasing losses, and driving up operating and acquisition costs. Growth continues, but resilience erodes. For fintech to keep expanding rather than plateauing, these constraints must be addressed.”

Key areas that the Philippines must look at are identity verification, increasing formal bank penetration through incentives for private institutions, leveling up its payments infrastructure by making transactions less costly through improving real-time settlements integration and reducing fragmentation, and boosting its consent infrastructure via the development of open finance.

“The Philippines did not build its fintech stack in neat sequence. Applications scaled first because demand was real, and that success exposed the rails that were missing underneath,” the report said. “That inversion is now the market signal. High onboarding costs, payment friction, conservative credit, and fragmented data are no longer abstract infrastructure gaps; they are visible constraints on margins, scale, and user experience.”

“The lesson is not to rebuild the stack from scratch, but to respond to what the market has already revealed. The next phase of growth depends on turning application-layer momentum into shared infrastructure — so innovation can compound instead of leak value.”

It said that addressing the Philippines’ fintech infrastructure constraints is more likely to succeed via a private-first, public-validated approach.

“Regulated private operators will have to build and prove infrastructure in-market, while the public sector sets standards, validates data, and applies mandates where incentives are misaligned.” — Bettina V. Roc