Fintech On-Rise: The Philippines


An overview of the Philippine fintech landscape, its current challenges, prospects, and crypto regulatory policy.

An overview of the Philippine fintech landscape, its current challenges, prospects, and crypto regulatory policy.

The pandemic has accelerated the development of the fintech industry. Cashless payments and banking digitalisation have started running rampant, and many countries, including the Philippines, quickly took on the new trend. Despite noticeable positive improvements and increasing capitalisation of the financial technology sector, the island country is not yet as advanced as the other Southeast Asian nations. 

The lack, or even non-existence, of a well-structured regulatory environment alongside poor financial inclusion of the industry hinder the progress. Nevertheless, fintech companies are rising, and their future is shaping as we speak.

Industry Development and Its Current State

Financial inclusivity is a typical issue of most developing countries. According to the central bank of the Philippines (BSP), in 2019, less than 30 per cent of Filipinos had bank accounts. In this regard, BSP set an ambitious goal to raise this figure to 70 per cent by 2023, and the numbers did increase. 

Fintech solutions, at least some of them, can assist with solving the inclusivity issue quite efficiently. Just think of it: today, over 74% of Filipinos own smartphones and can easily open a bank account using their devices via a legitimate app approved by authorities. 

Thanks to fintech platforms, the number of Filipinos with debit cards almost doubled from 2013 to 2018. As for digital payments, their spread is estimated to be around 30%, getting ahead of other countries in the region. Another positive note is that women’s involvement in the digital payment scene is even higher than men’s, and the former are more financially included in general. 

The pandemic ended up being a powerful accelerator, forcing banks to go digital and authorities to start planning out regulations strategies. With ecosystem broadening and increased sector funding, fintech startups count has begun growing. Currently, there are over 220 fintech firms registered in the Philippines, mainly focused on mobile payments, wallets, lending, eCommerce, investment, and blockchain tech. 

Regulatory Field

Three central government institutions regulate the Philippines’ fintech industry: the BSP, the SEC, and the Insurance Commission (IC). The goal of BSP is to increase financial inclusion and mindfully broaden the ecosystem of related service providers. The SEC is responsible for controlling lending and a few other industries. As for the IC, it monitors the insurance and home maintenance organisations.

Until recently, the Philippines authorities haven’t made too many attempts to regulate the fintech industry. Starting from 2021, things got off the ground, especially for cryptocurrency, open banking, and other actively growing industries. 

At the beginning of 2021, BSP set guidelines on virtual asset service providers to protect the Philippines from becoming an easy target of criminals and terrorists. Apart from strict AML rules, crypto exchanges and other financial organisations were obliged to obtain proper licences to operate in the country. A few months later, BSP introduced new guidelines for the Open Finance Framework, suggesting a consent-driven data-sharing model.

Opportunities and Roadblocks

An open digital environment provides the Philippines’ fintech companies with more opportunities. It is reasonably easy to integrate the country’s fintech products with services from neighbouring countries, paving the way for a sprawling international infrastructure. 

Covid-driven state tax incentives for small and medium businesses empowered companies to launch new products and services faster. At the same time, regulators moved off dead centre. They started actively participating in the industry’s present and future, bringing hope to the country’s rising number of fintech companies.

On top of that, other technology industries, such as AI, eCommerce, data science, are getting more support from authorities. The possibilities of collaborations between these companies and fintech firms can refine the growth area and tailor a new class of products and services. 

Insufficient investment is a massive roadblock en route to fintech evolvement. Despite the surging interest and a couple of exceptional cases like Mynt or PayMongo, the industry’s funding leaves much to be desired. Perhaps, the investment situation will improve once the country puts forward its first decent regulatory framework.  

The lack of talent is another concern. Digital space is highly competitive, and experienced specialists are hard to find even in the most tech-savvy regions. The Philippines has to start the transformation by introducing new educational programmes and fair wages.

The Bottom Line

The pandemic made people change their financial habits and turn to digital payments and online banking, empowering fintech companies in many Southeast Asian countries, including the Philippines. Although the industry is still in its infancy, the growth potential is higher than ever. The introduction of a well-designed regulatory framework alongside encouragement of investment will help significantly improve the state of the sector. 

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