There’s no doubt about it, financial technology (fintech) is a game changer, but more than that it has a strong potential to improve financial inclusion in the Philippines. In an economy where majority of its population are still without bank accounts or have not transacted with a bank, the Philippines has to leapfrog, not play catch-up.
GREAT EQUALI ZER – The ubiquitous credit and debit cards have empowered consumers to obtain or transfer funds, settle obligations, purchase items, and make other financial transactions with a mere swipe or a few clicks on the cellular phone or computer.
Fintech is more inclusive because it transcends across socio-economic differences and geographical distance. It could be an economic equalizer.
Fintech is the application of technology in financial services in a manner that drives the transformation or disruption of the traditional processes in the financial system.
At the forefront of this evolution is the Bangko Sentral ng Pilipinas (BSP). It has paved the way towards a shift to more electronic banking and digitalization.
The central bank’s maiden Financial Stability Report (FSR) said that “quite literally, the transfer of funds and the settlement of obligations are a few computer clicks away, regardless of the geographical distance between transacting parties (and fintech) in this sense is an equalizer of economic opportunities.”
Fintech reduces transaction costs, for one thing. There is also efficiency as an instrument of payment.
Fintech’s power lies in its accessibility. It is tailor fit to attract and serve the Filipino audience in providing access to financial services especially to far-flung locations across 18 regions. The so-called “digital natives” or the millennial generation who are used to convenience and speed would naturally gravitate to anything digital.
Already, there are now more than 60 fintech players in the country but less than 30 percent are directly supervised by regulators.
The presence of these players would show the Philippines presents a good value proposition.
Consider these data. Of 101 million Filipinos (2015 data), 56 percent of the population have regular use of the internet (2016 data), 56 percent have smartphones and SIM penetration is 113 percent of the entire country.
The big market is certainly here. The BSP cited a 2015 data from Better-Than-Cash Alliance which estimated that fintech has the potential to take up 2.63 billion financial transactions a month valued at P2.85 trillion or 92 percent of all transactions (amounting to P3.09 trillion a month).
In 2015, about 99 percent of the transactions were paper-based such as in cash or checks. To push for digitalization of financial services, BSP launched the National Retail Payment System (NRPS), also in 2015, as a safe, efficient and reliable electronic payment system that is interconnected and interoperable, and should digitalize 20 percent of the country’s retail payments in two years from just one percent in 2015.
