by Allen Guo, Country Manager for the Philippines, Alibaba Cloud Intelligence
The pandemic lockdowns have brought forth a sudden surge in demand for online payment solutions as transactions have increasingly shifted online. With physical transactions limited by quarantine and social distancing measures, cloud-based FinTech products have become a necessary tool not only for businesses but also individuals across the range of daily needs.
To accommodate the rise of cashless payments, FinTech companies are turning to cloud solutions for their ability to handle high volumes of digital transactions with minimal interruption. Cloud products are also seen as enabling businesses to deliver new products and services seamlessly and cost-effectively, making firms more adaptable to the shifting demands amidst the pandemic.
A recent survey entitled “The Role of Cloud in Asia and Confidence in Asian Innovation”, commissioned by Alibaba Cloud, showed that 94% of Philippine businesses believe cloud-based tools or digitalization efforts were the most important factor in helping their companies mitigate the COVID-19 operating environment.
The promise of FinTech in the Philippines
The Philippine FinTech industry has been steadily growing in recent years, with advancements in digitalization and the availability of smart devices leading the development. The introduction of more online services by banks, rising number of FinTech startups and favorable government policies have also helped boost the industry.
With some 73 million people, or about 70% of the population of the Philippines now online, the country is a key growth market for FinTech applications. With many Filipinos still unbanked, e-money also makes it possible for them to engage in financial transactions online. The Bangko Sentral ng Pilipinas (BSP) – the Philippine central bank – has forecasted the share of digital transactions to reach at least 50% by 2023. Another enabling factor is a local population that is generally young, digitally native and receptive to new ways of doing business and interacting online.
The potential of FinTech is evidenced by the substantial growth of e-money accounts among the local population during COVID-19, which according to BSP has grown from just 1.3% in 2017 to 8% in 2019.
The challenges facing FinTech companies
But there are also challenges to this progress. For one, the capital requirements needed for FinTech startups to develop the advanced technologies necessary to compete are high and have become a barrier to entry.
With customers expecting a fast and intuitive experience, FinTech companies need to deploy smart and agile service models that enable them to respond to demand efficiently. Online payments, as an example, are expected to be processed in real-time.
Other challenges include minimizing service instabilities and data inaccuracies as well as setting up robust cybersecurity protocols to prevent hacks and other digital threats to sensitive information. Notably, the Alibaba Cloud survey also found that more than 60% of Philippines businesses said the security credentials of cloud solutions providers is their top concern when deciding who to work with.
The point is that while there is a large and growing potential for FinTech to address longstanding needs in the Philippines, the complexity of the applications paired with the resources needed to execute on them is still a hurdle for many aspiring firms. The will is there, but the way is still developing.
The future of FinTech enabled by the cloud
Cloud technology has been a hallmark of digitalization across industries, countries and continents. It has enabled FinTech companies to keep the data secure, effectively scale their operations and deliver increased flexibility in the way their users transact. During COVID-19 the value of cloud solutions has grown, with 88% of local businesses reporting they are more supportive of using such technology now as compared to before the pandemic.
At Alibaba Cloud, we see the role of cloud providers as helping FinTech companies deliver products and services that operate seamlessly and reliably for their end users. To this end, our solutions cover regulatory compliance, security network availability and latency, scalability, disaster recovery and backup.
Cloud technologies are also important for improving the systems businesses use in their operations. For example, a cloud-native security solution provides FinTech companies with an added level of security that is optimized for cloud environments, making them less susceptible to cyber attacks.
As the leading public cloud service provider in Asia Pacific, Alibaba Cloud provides localized solutions and all of its major products – such as its elastic computing, database, and network and security services – to empower the digital transformation of enterprises in the Philippines.
The role of strategic partnerships
Another important area of focus for cloud providers is partnerships. For our part, Alibaba Cloud has partnered with Temenos, the world’s number one banking software company, to certify Temenos Transact, a next-generation core banking product. This allows banks to easily adopt and run Temenos’ banking applications on Alibaba Cloud, making deployment quicker with elastic scalability and lower IT infrastructure costs.
We recently joined the FinTech Alliance Philippines as a way of advancing the local industry. We see the exchange of knowledge and experience as an essential way forward in developing solutions tailored to the needs of Philippine businesses.
Alibaba Cloud also provides a mix of digital solutions to GCash to accelerate financial inclusion in the Philippines. For example, leveraging Alibaba Cloud’s Infrastructure-as-a-Service (IaaS), GCash is able to handle sudden increases in traffic while maintaining cost efficiency.
FinTech in the Philippines is as promising as it is challenging. But cloud technology has emerged as a viable solution that is helping companies to be more responsive to the needs of the market, especially during the pandemic. For those currently on the sidelines of the financial industry in the Philippines, the time of widespread participation is coming quickly.