INTERNATIONAL think tank Fitch Solutions Inc. said mobile banking in the Philippines has gained momentum recently and is expected to benefit the country, but underdeveloped digital infrastructure puts a downside risk to its growth.
In an analysis published on Thursday, the research arm of Fitch Group said the Philippines’s regulatory and demographic environments are broadly favorable of financial technology (fintech) adoption, with the country’s large, scattered population providing a sizable market on which to leverage mobile banking.
The group lauded the government’s recent advancements to push for mobile banking in the country, particularly the efforts of the Department of Information and Communications Technology (DICT) and the Bangko Sentral ng Pilipinas (BSP).
“At Fitch Solutions, we believe the fintech market in the Philippines is weighted slightly to the upside. Mobile operators are often key enablers of fintech solutions, and banking services offered by Globe and PLDT have quickly capitalised on the country’s large unbanked population and the shift in customer behaviour accelerated by the pandemic—benefiting from first-mover advantage,” Fitch Solutions said.
The expansion of the fintech market is expected to largely benefit the country’s high unbanked population, according to Fitch Solutions.
“The lack of banked population in the Philippines does present downside risk, but as the adoption of digital financial services has grown significantly in recent years, we believe the outlook is promising,” the think tank said. While fintech has gained momentum, Fitch Solutions said there are still pitfalls to look after in the industry.
“We caution that the fintech market in the Philippines is still fairly immature, particularly when compared to its neighbors, most of which record higher proportions of mobile banking customers and already have more developed fintech infrastructure. As a result, we believe the opportunity for Filipino mobile banking operations to expand outwards to neighboring countries is fairly limited,” the think tank said.
“Also adding downside risk is the relatively undeveloped digital infrastructure nationwide. Fixed broadband is extremely limited across the archipelago and users often experience noticeable latency. As such, drivers of digital payments uptake like e-commerce use is restricted and often a frustrating experience,” it added.