Fintech development to support Philippines growth — Fitch arm

MANILA, Philippines — The continued development of the financial technology (fintech) sector in the Philippines, together with positive demographics, would help sustain the country’s strong economic growth.

Fitch Solutions Macro Research said in its latest industry trend analysis the main driver of fintech services adoption is the country’s archipelagic nature that inhibits infrastructure expansion required to improve banking penetration, thus limiting bank branches and ATMs to metropolitan areas.

“The proliferation of smartphones in recent years has allowed operators to ride on the fintech wave and indeed, many fintech services in the country continue to be operator-led models,” Fitch Solutions said.

PLDT Inc. operates fintech service arm Voyager and Ayala-led Globe Telecom through Mynt.

“The governments holds a favorable view towards fintech applications, but has appeared unwilling to liberalize the sector to allow for greater foreign participation,” it added.

Although late to acknowledge the importance of fintech, Fitch Solutions said the government is becoming increasingly receptive to financial services innovation as the Bangko Sentral ng Pilipinas (BSP) launched the National Retail Payment System (NRPS).

This paved the way for the introduction of automated clearing houses including the PESONet (Philippine EFT System and Operations Network) in November 2017 and InstaPay in April 2018.

The BSP has pioneered a fintech sandbox since 2004, adopting a “test and learn” approach to the services paving the way for the pilot testing of  the mobile money services of PLDT and Globe.

The BSP has also used a similar “test and learn” approach with Lendr, the peer-to-peer (P2P) lending arm of Voyager and introduced new provisions to regulate pawnshops and money service businesses in the Philippines in anticipation that these businesses will be used as cash points for money transfer services.

“We expect the regulatory environment to remain responsive to new fintech developments,” it said.

According to Fitch Solutions, fintech will have the biggest impact on the country’s burgeoning cross-border remittances market that reached a record $28.9 billion in the Philippines last year.

Companies such as TransferWise and WorldRemit have been focusing on marketing to Filipino migrant workers, offering competitive exchange rates and lower transfer fees compared to traditional remitters, such as MoneyGram and Western Union.