BSP: Digital banking key to tap unbanked market

Carlo S. Lorenciana (The Freeman) - January 13, 2015 - 12:00am

CEBU, Philippines – Technology has a key role in bringing financial services to people who have never accessed traditional banking, the Bangko Sentral ng Pilipinas said.

With the wide inequality of socio-economic setting in the Philippines and the geographical dispersion of its population, the central bank said brick-and-mortar banking may not already be viable.

Globally, it is estimated that more than 2.5 billion people do not have a formal bank account. But the use of mobile phones among the unbanked people has been increasing. These people have the tendency to use mobile devices. The increasing smartphone usage drives the technology’s potential to be part of the monetary habits of those excluded from formal banking.

BSP’s Inclusive Finance Advocacy Staff noted the nature of digital banking gives a significant upside in overcoming the barriers to financial inclusion.

“These factors present a convenient opportunity for financial service providers to leverage on mobile phone technology to literally put a financial service access point on the hand of every Filipino,” IFAS told The FREEMAN in a statement.

“The BSP recognizes the potential of digital banking in reaching the currently unbanked segments,” it said.

Cebu Bankers Club president Gino Gonzalez said technology is certainly the future of the country’s banking system. “With the help of technology, we can now do banking at home. You don’t have to go to physical banks as anyone can use the Internet to transact,” he said.


The central bank has created a regulatory framework that enables banks and non-bank providers to innovate products and processes to advance e-money services.

BSP's e-money regulations including its circulars 649 and 704 have been implemented to allow money transfer, retail payment and financial access through online banking.

The central bank has now 27 banks and 5 non-banks -- these are telecommunications subsidiaries -- which act as e-money issuers.

“There are now over 10,000 active e-money agents, most of which are non-bank outlets like pawnshops, drugstores and airtime loading centers,” IFAS said.

It also added the growth rate in the number of agents over five years is 40 times faster (2,400 new outlets per year) than the expansion of bank branches over 160 years (60 bank offices per year, resulting to a total of 9,884 bank branches and head offices inside the country).

The advocacy center also reported that as of end-2013, the 26.7 million e-money accounts generated 217 million transactions amounting to P696 billion -- these include inflow and outflow money.


Technology that involves big data processes and algorithms also have the potential to assess the capacity and willingness to pay of prospective clients.

It noted: “This technology can significantly bring down cost of securing credit information, which many low-income segment people and micro, small and medium businesses lack. Banks may be able to leverage on this technology in targeting new clients from these sectors, thereby lessening the level of financial exclusion in the country.”

With the right regulatory environment and technological innovation, the central bank believes financial firms are better positioned to serve the large untapped market -- the unbanked and underserved.

According to its Consumer Finance Survey, 80 percent of Filipino households have no deposit accounts; 26.6 percent of adult population do not have deposit. Of the total enterprises in the country (96.1 percent are micro and 3.5 percent are small and medium), only 5.7 percent of them source their funding from banks.

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