Fintech firms poised to grow rapidly in PH—Moody's
Financial technology (fintech) companies in the Philippines are poised to overtake brick and mortar banks, debt-watcher Moody’s Investors Service said.
In a commentary on Thursday, July 15, Joyce Ong, Moody’s analyst said that fintech has “abundant room” for growth in the country as 70 percent of Filipino adults do not have access to formal banking services.
“The country presents a large untapped market for fintech companies because only a small proportion of the country's population uses banking services,” Ong said.
She said the country, with almost 110 million population, has a lucrative remittance market where fintech firms, such as providers of mobile wallet applications, can capitalize on.
Conventional banks in the county are also slow in developing digital services, Ong noted.
According to the Moody’s analyst, the slow pace response of traditional banks have gave these new breed of digital-only banks an opportunity to capture the depository service, credit card, remittance and unsecured lending businesses.
“This will threaten banks' position in key areas of their retail business,” she warned. "Most banks are not proactively responding to the threat of fintech companies.”
Traditional banks still prefer to maintain their current business model that is mostly focused on corporates, Ong said.
“A failure to respond quickly to the emergence of fintech companies will make it more difficult for Philippines banks to acquire new customers and create new revenue sources, especially from the large unbanked population,” she said.
Today, the penetration of mobile wallets already exceeded that of bank accounts after fintech companies used digital payments to gain a foothold in the Philippine financial system, Ong said.
“Competitiveness in the retail segment is critical for Philippine banks given its huge growth potential,” she said. “It will be challenging for banks to win market share from fintech companies with established franchises because most of them have been slow in digitalization.”
In addition, Ong said social-distancing measures due to the pandemic have provided a catalyst for the adoption of digital financial services.
“Fintech companies also align well with government policies to promote financial inclusion through the adoption of digital payments,” she said.