Fitch unit: Philippine fintech sector to continue banking on OFW population for growth

MANILA, Philippines — Philippine financial technology players will continue fighting for a bite of the remittances market as they seek to take advantage of the large population of Filipino expats, a Fitch unit said Friday, adding that positive demographics should support the sector’s growth.

In a report, Fitch Solutions said fintech companies have been targeting overseas Filipino workers by offering competitive exchange rates and lower transfer fees compared to traditional remitters.

“We believe that fintech will have the biggest impact on the country’s burgeoning cross-border remittances market, which in 2018 handled over $28.9 billion of receipts from overseas destinations, trailing only China, India, and Mexico globally,” it said.

However, many Filipinos abroad continue to patronize traditional money remittance services, Fitch Solutions said, mainly due to their wide physical presence in the country.

“As such, we believe that operator-led platforms continue to be prime candidates to further penetrate the digital remittances business,” Fitch Solutions said.

Many fintech companies like PLDT’s Voyager and Globe’s Mynt have grown in the Philippine archipelago, where it has proved difficult to expand infrastructure required to improve banking penetration and cover all of the country’s more than 7,000 islands.

GrabPay, the payments service of ride-hailing app Grab, is also emerging as a considerable competitor in the Philippine fintech space.

According to Fitch Solutions, while the government is embracing fintech, it has “appeared unwilling to liberalize the sector to allow for greater foreign participation.”

“Although late to acknowledge the importance of fintech, the state is becoming increasingly receptive to financial services innovation,” it said.

“While the usage of technology in the microfinance sector is not very advanced, the sector itself is well established in the Philippines,” it also said, adding it stays bullish on the application of fintech for microfinancing and peer-to-peer lending amid high consumer appetite for credit. — Ian Nicolas Cigaral