Government trained its sights last week on financial technology (or ‘fintech’) companies as the Secretary of Finance instructed the Bureau of Internal Revenue (BIR) and the Securities and Exchange Commission (SEC) to ensure that these are properly regulated and taxed while encouraging the sector’s growth and innovation.
Since the coronavirus outbreak in March 2020, many fintech companies have become active providers of goods and services as normal business routines have been disrupted. Thanks to accelerated digital transformation, consumers and citizens have been enabled and empowered to carry on with their vital day-to-day activities such as ordering meals, groceries and medicines and carrying out online financial transactions. Shuttered businesses have been able to carry on important business meetings and conferences through online links and digital platforms that provide instant, real-time connectivity.
The SEC has been directed to strengthen its PhilFintech Innovation Office, which serves as the first point of contact for fintech firms applying for registration, or for existing ones that have been operating or are introducing new products. Expecting a surge in fintech activities as many business model variants have emerged, the finance department has advised the SEC to augment its budget, strengthen its capability for servicing firms in this sector and hire young, digitally skilled employees.
The DOF’s action responds to the imperatives for economic recovery advocated during the Philippine Business Conference (PBC), the largest annual business gathering in the country. The business sector has called for economic activism in the country, citing four related priorities, as follows: 1) Institutionalize innovation for economic development, 2) Open the economy now and assist businesses to create new jobs, 3) Fully implement ease of doing business, 4) Fast-track internet connectivity at competitive rates.
As declared by the PBC conference chair, it is a must that business must embrace technology from analytics for decision-making to digital marketing and social media to software solutions for speed to market.
Startup Genome’s Global Startup Ecosystem Report says that fintech companies in Manila account for 15 percent of start-up enterprises; market growth is projected from about US$5.7 billion in 2018 to US$10.5 billion by 2022.
It is imperative that the DOF’s focus on fintech firms must be in harmony with these priority concerns. Hence, a cautionary note may be in order. Regulation and taxation are best implemented within the context of encouraging growth and innovation. Even without tax incentives, the emergence and growth of fintech companies has occurred spontaneously and autonomously. Necessity is the mother of invention. Speed to market innovation has been spurred by the urgency of the needs spawned by the pandemic.
The Philippines continues to enjoy the dividends from having a demographic ‘sweet spot’. A large segment of its population is made up of young people who are actively employed, urbanized and digitally-savvy --- factors that are conducive to the emergence of fintech start-ups that should be encouraged to grow and expand so these could provide beneficial services to the community and to the nation.