By Rose Arreco, Business Development Manager of Digido
The Philippines’ “fintech-ization” is going from strength to strength.
As covered by Back End News, our latest projections reveal that the adoption rate of financial technologies through mobile applications among Filipinos aged 15 years old and above may increase to 79.5%, or approximately 66.4 million unique users — illustrating widespread digitalization powered by collaboration.
We also view this as further evidence that some of fintech’s main segments — banking, e-wallets, lending, payments, and e-commerce — continue to be viewed as trusted platforms.
As challenges related to financial inclusion remain, the data is also a reminder that companies like us should challenge ourselves to be even more creative and innovative in reaching more underserved segments for this increased patronage for fintech to be even more meaningful.
In this case, and for this particular opportunity, this means spotlighting and intensifying efforts to reach persons with micro, small, and medium enterprises (MSMEs), whose potential for further growth remains kneecapped due to the lingering billion-dollar funding gap.
In other words, we are to ensure that the country’s MSMEs, considered the lifeblood of the Philippine economy, ride the growing fintech adoption wave.
Natural synergy within fintech segments
It’s worth noting that there’s already the natural synergy between fintech’s main segments — making it incredibly practical for small business owners to access financing in this manner.
As an illustration, and thanks to a smartphone penetration rate of 80.4% (and growing), small business owners can already turn lenders’ own mobile applications or ones embedded or linked with e-wallets and e-banking applications. We are also observing a correlation between the growth of digital lending services with e-banking and e-wallet applications, as trends and recent partnerships suggest that the services of the former can bring up the latter segments’ respective user base.
Our own experience reflects this. On average, around a fifth of our clients using our cash loan app avail our loans as additional business capital, expressing positive sentiment over the pace of disbursement and having minimal requirements.
Speaking from the point of view of a digital lender, players like us are not encumbered by the usual barriers that borrowers encounter when accessing credit via traditional means. KYC (know your client/customer) documents, for instance, are usually submitted online using one’s mobile phone and companies’ respective proprietary algorithms will decide whether the applicant can be granted a loan.
Verification, therefore, can be made in less than an hour, and getting one’s loan approved can be made instantly using available online resources from credit bureaus and credit scoring models. The heavy reliance on information technologies (IT) significantly cuts human interaction between the borrower and lender, allowing the latter to complete the process and disburse the amount to the borrower in less than 10 minutes.
This is particularly helpful to small business owners who do not have the commercial privilege to source financing elsewhere to maintain operations during unfavorable business conditions. Small to medium business owners who do not have appropriate collateral or lack credit history can also turn to digital lenders to improve their creditworthiness.
Reaching overlooked retailers
Aside from access to business capital, the intrinsic agility of fintechs and mature level of internet engagement in the country has thankfully resulted in even more small businesses outside of Metro Manila being able to provide payment solutions and other types of financial services for customers.
Aside from collaborating with retail heavyweights, we are observing that some platforms are even proactive in seeking out upstart or overlooked MSMEs and are taking the time to understand their community, business needs, and how they can quickly take advantage of digital services.
Now that we’re in the “ber” months, joining the country’s fintech ecosystem even becomes more relevant for MSMEs. Examining user activity from 2019 to 2023, we also observed that fintech app users tend to be more active in the second half of the year, especially during November and December, primarily driven by ones within the e-commerce segment. Demand aside, the convenience resulting from these strategic partnerships will likely have a direct impact on consumer spending.
Multi-sectoral approach to financial, digital literacy
Riding the “wave” of growing fintech use warrants a call for a bolstered, multi-sectoral approach to financial and digital literacy. In the context of MSMEs and their owners, these mean recurring seminars or workshops on integral concepts of finance, for financial institutions to have proper and clear disclosure of terms and conditions for business owners seeking financing options, continued efforts by industry on cyber-resilience, and partnerships intended to reach specific consumers or demographics, among other established activities.
Slowly but surely, financial inclusion in the Philippines is being addressed. Considering these trends, there’s reason for optimism that the funding gap faced by our MSMEs will decline over the long term.
Digido is a state-licensed online lender with a branch networks in the Philippines
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