How fintech is increasing financial inclusion for Filipino consumers

David Brady, Sales Director at Mambu

By David Brady, Sales Director ASEAN, Mambu

Financial technology (fintech) is changing the way individuals and businesses access and manage their finances around the world. In the Philippines, a country known for its tech-savvy population and incredibly high internet and mobile phone penetration, fintech is making significant strides in driving financial inclusion, resulting in the delivery of more affordable and accessible financial services to individuals and businesses that have traditionally been excluded from the the formal financial services sector.

While a significant proportion of the Filipino population remains unbanked, significant progress has been made in improving financial inclusion in recent years.

According to the World Bank’s Global Findex Database, in 2017, 34% of adults in the Philippines had a bank account, up from 31% in 2014. While more recent statistics are not available from the World Bank, the Bangko Sentral ng Pilipinas (BSP) latest survey on financial inclusion shows a dramatic increase in the percentage of the population that has a formal bank account, up to 56% in 2021.

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Despite this increase in the “banked” population, there remains a gap between urban and rural areas, with rural areas lagging behind in access to financial services. Fintech plays a critical role in bridging this gap by providing innovative solutions to reach underserved populations, including mobile banking and payment apps and other digital channels that offer financial services, leveraging the Philippines’ high mobile penetration rate.

The rise of BNPL & Embedded Finance

One of the most important trends in fintech is the emergence of Buy Now Pay Later services (BNPL), a type of credit that allows customers to split the cost of purchases in smaller installments. In the Philippines, BNPL is becoming increasingly popular with young people and those with limited access to credit, and we are seeing an increasing number of fintechs partnering with retailers to offer BNPL services at the point of sale. These services help increase financial inclusion by providing access to credit to those who would otherwise not be able to get it.

Another way fintech is improving financial inclusion in the Philippines is through embedded financial services. Embedded Finance refers to the integration of financial services into non-financial products and services. For example, a ride-sharing app might offer a loan to a driver to buy a vehicle, or a supermarket might offer insurance to customers at the checkout. Embedded financial services help increase financial inclusion by making it easier and more convenient for consumers to access the financial services they want and need.

Cash is no longer king as the digital economy booms

As the digital economy grows, cashless transactions are becoming increasingly popular in the Philippines, with the use of digital wallets and mobile payments growing rapidly. A 2022 Visa research study identified that 92% of Filipinos had used cashless methods to shop and pay, with only slightly more than half (53%) identifying cash as their preferred payment method. This is a huge shift from just a few years ago – in 2015, only 1% of all retail payments were made electronically. Initially driven by the pandemic, the conversion from cash to online or mobile payments has been rapid in the country, and the Philippine government has also encouraged consumers to embrace digital payment options with the National Retail Payment System and the Philippine QR code standard.

According to a report by Google, Temasek and Bain & Company, the Philippines’ digital economy is expected to reach $28 billion by 2025, up from $5 billion in 2018, driven by the rapid adoption of e-commerce, ride-hailing and digital banking services.

This rapid growth of the digital economy in the Philippines is creating a number of new opportunities for fintech to launch innovative new products that can improve financial inclusion and offer new ways to access financial services that bypass traditional methods such as credit cards, and we expect to continue to see improvements in the country’s economic inclusion rates in the coming months and years.

Mambu is a software that delivers infrastructure to banks and financial providers according to the software-as-a-service model.