By Reyner M. Villasenor
Ever since the golden days, Filipinos are used to have a small amount of cash in hand to purchase goods for their short-term needs—like shampoo or conditioner, a snack or candy, or even a condiment at the neighborhood sari-sari stores. Households also prepare cash from their salaries, and queue on banks or payment centers to pay bills or send money to loved ones.
Cash is still the king for the Filipino consumer, and it always has been. But over the past decade, we saw a gradual yet vital development in the landscape of money transactions that has been starting to take a leap in the past two years. And that is, the digital disruption in banking and financial services.
With the rise of technological advancements like smartphones and the Internet, we now see transactions being done online, payments and load purchases done on mobile phones, and having the ease of paying, borrowing and sending money anytime, anywhere without the hassle of carrying loads of cash, or queuing.
Digital disruption is currently taking place in how we handle our purchases and transactions, therefore working its way towards the greater goal of financial inclusion, where people have access to affordable financial products and services that they need.
According to the Bangko Sentral ng Pilipinas (BSP), about 9.2 percent of the country’s total transactions were done electronically in 2017, which is a high jump from the minimal 1 percent electronic transactions in 2013. This shows that more and more Filipinos are gradually settling their transactions online.
We are facing a time where technology is on an upward trajectory and is ripe to be one of the main foundations of how we settle our transactions moving forward. But before we can put our gears into motion towards the acceleration of technological adoption in our transactions, let us look back on how financial technology (fintech) started and proliferated over the past decade in the Philippines.
Almost 20 years of fintech in PH
It was in the year 2000 when the BSP allowed banks across the country to engage in electronic banking (i.e. mobile banking, remittances, and digital payments) to expand client reach and improve financial access. This was one of the first steps of the central bank towards digitization, which paved the way for the BSP to be supportive of fintech and make financial inclusion as one of its key priority areas.
Despite the hopes and promise that this change opened up, it took some years before the banks adopted online banking because around 8 out of 10 Filipinos at the time were still unbanked, online penetration was not yet pronounced; and although the use of prepaid mobile phones was prevalent, there was yet more work to be done to entice the public to open bank accounts and do transactions via banks.
Presented by this scenario, early 2000s was the prime time when some of the oldest fintech companies and startups in the Asia Pacific region such as GCash, now operated by Globe Fintech Innovations Inc. (Mynt), were established and introduced to the public.
Fintech services of GCash were made available then via analog mobile phones, primarily to buy load for prepaid mobile users and remit money to loved ones anywhere in the country. This was the very foundation of fintech in the country. But the Filipinos’ adoption to fintech did not happen overnight. It took 10 years for change to be felt in the local scene. While global companies from different parts of the world saw what was being developed in the Philippine fintech landscape, they have adopted fintech innovations and have scaled much faster.
Supportive regulator
This decade-old transition meant people are also exposed to evolving fintech applications in their daily lives—from the traditional prepaid phones to the newest smartphones and the Internet. During this transition, the BSP was one of the first central banks in the world to create an office dedicated to financial inclusion with the establishment of the Inclusive Finance Advocacy Staff (IFAS) in 2007. IFAS implements, coordinates and advocates the microfinance and financial inclusion initiatives of the BSP.
It was also IFAS which conducts the yearly National Baseline Survey on Financial Inclusion. The survey tracks the evolution of the digital transactions of Filipinos and the progress of fintech in the country. The BSP has made financial inclusion one of its major goals, and this was solidified by a number of programs and initiatives that they launch, including the announcement of the National Retail Payment System (NRPS) in 2015. The NRPS will establish a safe, efficient, affordable, interoperable, and reliable retail payments system which will serve as a platform for fintech innovations in the country.
With the NRPS, the central bank is targeting to improve the share of digital payments to 20 percent by 2020 of the total transactions in the country, compared to the 9.2 percent recorded in 2017.
Rise of the digital natives
Alongside the strong support from the BSP, the new generation of millennials who regularly use smartphones, the Internet and social media also expects convenient experiences in solving their day-to-day problems. This is where many fintech companies come in. The Philippines has observed influx and evolution in fintech over the past two to three years. From payments, money transfers, lending, insurance, and even investments, fintech companies are starting to be competitive by making their services quicker, smarter, more convenient and cheaper.
Fintech companies are overtaking banks in the adoption of digital tools in offering convenience to the daily lives of the average Juan dela Cruz. Some of the examples of these accelerated fintech services are offered by GCash, which include the contactless mobile QR code payments to around 70,000 partner merchants nationwide, online money transfers and purchases through analog and high-tech mobile phones, and building of credit scores which enable users to get loans which are affordable and easy to pay.
With the development of financial services within nearly two decades, existing and incoming fintech players believe that the fintech revolution is now starting and is ready to take off in opening up avenues for convenience in the everyday lives of Filipinos.
Reyner M. Villasenor is the chief corporate affairs officer of GCash (Mynt-Globe Fintech Innovations, Inc.)