Sluggish digitalization among local banks will allow homegrown fintech firms to corner a bigger chunk of the growing financial services market especially as the COVID-19 pandemic persists, according to debt watcher Moody’s Investors Service.
“Fintech companies in the Philippines are poised to grow rapidly, while conventional banks remain slow in developing digital services. This will threaten banks’ position in key areas of their retail business,” Moody’s said in a July 14 report.
Moody’s noted that about 70 percent of adults in the country lacked access to banking and financial services prepandemic, hence presenting an “abundant room for growth” for fintech providers like GCash and Paymaya.
It also helped that the Philippines was one of the leading destinations of remittances from migrant workers, which Moody’s said mobile wallet applications could capitalize on.
“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,” Moody’s said.
While fintech service providers were aggressively trying to capture these emerging markets, majority of banks in the country were “not proactively responding,” Moody’s noted.
“Banks in the Philippines have been slow in developing digital offerings to tap into the unbanked population, be it on their own or in partnerships with external companies; instead, they prefer to maintain their current business model that is mostly focused on corporates,” Moody’s noted.