INDX Summit: In pursuit of financial inclusion, the Philippines has the power of fintech

From artificial intelligence and the metaverse, all the way to the basics of digital currencies and the fintech potential, these were the highlights of Day 2 of the INDX Summit 2022 at the Enderun Tent, Taguig City, which took place on November 23.

The Philippines has been pushing to adopt blockchain technology in an effort to spur innovation and revive its ailing economy hit hard by the coronavirus pandemic, which former Public Works and Highways Secretary and Senator Mark Villar said helped propel the country toward innovation despite the hardship it brought to the health sector.

“The pandemic has exposed and brought pressure to bear on necessary reforms in public health, the social safety net, disaster response and rural development, among other things,” he said in his welcome speech. “But what reinforced all these reforms is the digital imperative (that) digitization is the way, and that’s the key.”

For industry players, incorporating distributed ledger technology into services and day-to-day activities will put the Philippines at the forefront of technological innovation, while helping to find a solution to common problems facing the country. But blockchain is not the only technology to focus on, with the shadows of fintech and even the highly volatile and speculative virtual currency market lurking around, promising to change the financial industry and achieve what global leaders have been trying to achieve—economic inclusion.

Entrepreneurs and thought leaders invited to speak at the high-level event all agreed that to achieve economic inclusion in the Philippines, the country must focus on strengthening three things: education, talent pool and partnerships.

Moving into a cash-lite economy

Countries from all corners of the world have stepped up their digital transformation, and the Philippines refused to be left behind. While the pandemic exposed the poor state of the country’s healthcare sector, the fintech industry made a great point – fueling digital transactions, the introduction of cashless payments and the introduction of open finance.

Branka’s Co-Founder and CEO Todd Schweitzer noted that one of the underappreciated qualities of open finance is that it provides less reliance on traditional banks to build their own digital apps, something he argued the local banking sector is not very good at.

Pictured: (L to R) Event Host Daniela Laurel, John Broxis, Edison Tsai, Mark Gorriceta, Todd Schweitzer, Derrick Loi

Schweitzer spoke on a panel consisting of Managing Director of International Business of Digital Technologies at Ant Group Derrick Loi, Gorriceta Africa Cauton and Saavedra Managing Partner Advokat Mark Gorriceta, and Open Banking Exchange and Europe Managing Director John Broxis.

“That’s where the real innovation is,” Schweitzer said, emphasizing the efficiency that open finance brings, adding that this latest technology targets the 78% of unbanked Filipinos that traditional banks could not.

Maya Philippines Chief Strategy Officer Paolo Azzola, meanwhile, recounted his first trip to the Philippines in 2015, where 99% of Filipinos use physical cash to pay for goods and services, while only one percent use digital transactions.

Citing previous estimates, Azzola said the Philippines “has come a long way” in adopting digital payments, with 20% of the population using cashless transactions in 2020. He further estimates that number will rise to 50% by 2023.

“All these may sound like statistics that are easy to come by, but it took a very significant amount of work (and) cooperation with financial institutions, banks, as well as of course regulators,” he pointed out.

PayMongo Chief Operating Officer and Acting CEO Isabel Radid acknowledged that the pandemic served as an avenue to introduce Filipinos to mobile wallets, but emphasized that the rapid rise in digital payments is likely due to cashless transactions that offer less friction, with many sticking to the use of e-wallets even after pandemic restrictions were eased.

UNO Digital Bank Founder and CEO Manish Bhai said this development had shown the positive effects of digitalisation.

“Digitalisation is not just for the sake of digitalisation. Digitization has no meaning if it does not have efficiency; financial benefits,” said Bhai.

Regarding the concept of how cashless payments help build financial inclusion, Azzola said that transitioning to digital transactions gives Filipinos access to credit and a secure environment in which to safely invest, highlighting the tragedy that happened to the province of Tacloban, where the savings of many local people used paper money was left in ashes after an accident.

As fintech gradually flourishes, questions arise as to whether traditional banks can keep up with the competition or whether it will soon be a thing of the past when open finance comes on the scene. But Radid said that while the popularity of digital banks is growing, she believes the two entities will continue to coexist.

Pictured: (from left to right) Daniela Laurel, Manish Bhai, Isabel Ridad, Paolo Azzola

– The boundaries between digital and traditional banks are beginning to blur. It is up to fintech companies and traditional banks to continue working together for financial and digital inclusion.”

Dr. Roberto Martin Galang, dean of the John Gokongwei School of Management at the Ateneo de Manila University, in a separate panel, also addressed this issue, arguing that traditional banks remain essential to the fintech industry to this day.

“We all believe that financial inclusion or fintech is a one-way street. The moment you try the latest app, the moment you made a digital payment, the moment you did mobile banking, you would never set foot in the bank again, but that is not true. Because there are costs involved, there are learning curves involved, there are trustees involved, and as an educational institution we want to understand banks. Because we not only want to create the skill set of the future, we also want to understand the payment points of the consumer – in the industry – so that we can really promote a more inclusive financial sector,” said Galang.

Education remains the main key to inclusion

According to the World Population Review, the Philippines has a staggering 96.62% literacy rate in 2022, just 0.15% less compared to neighboring Singapore. While the figure is considered an achievement for a developing country, it overshadows the overall education situation in the Philippines, where the number of out-of-school youth (OSY) has snowballed since the pandemic.

Data from the Philippine Statistics Authority (PSA) in 2017 showed that nine percent, or 3.53 million Filipinos aged 6 to 24, were considered OSYs. This figure rose to 16.9% in January 2020 and peaked at 25.2% in April of the same year, according to a study by the United Nations Children’s Fund.

And despite a billion-dollar budget for the education sector, the Philippines ranked lowest in education among its Southeast Asian neighbors in a 2019 poll conducted by the Organization for Economic Co-operation and Development (OECD), painting a bleak picture of how the country, singled out for its skills in English, are unable to keep up with the rest of the world.

INDX panelists all agree that this is a cause for concern, noting that without proper education, despite Filipinos being digitally literate and adoptive, financial inclusion will not be achieved without financial literacy, which is only possible through proper education.

To address this, while ensuring the country’s technical talent remains high, Galang said academics must upgrade curriculum and craft programs to improve the technical skills of students and meet the growing demands of youth entering STEM (Science, Technology, engineering). , and mathematics) fields.

“Technology, (and) finance are here to stay,” Galang said, adding that his team is looking for partnerships with the private sector to provide and expand financial inclusion in society.

For the World Bank’s Senior Financial Sector, Radu Tatucu, improving the education sector will have a positive ripple effect and will open up better job opportunities among Filipinos and improve the state’s competitiveness regardless of industry.

Notice the soft skills, not always the hard ones

But Coins.ph President and CEO Wei Zhou pointed out that the country also needs to improve the way it screens its talent, as companies focus more on hiring workers who have strong technical skills, while often leaving behind people who are not strong in technology. page.

“What we need is to actually upgrade the people who actually work on these buildings to be much more entrepreneurial, to be much more actually driven,” Wei said, referring to employers in large financial institutions. He added that changing the mindset of the local workforce will drive the wave of the digital economy in the Philippines.

Pictured: (from left to right) Daniela Laurel, Radu Tatucu, Roberto Martin Galang, Christo Georgiev

Zhou received nods from fellow panelists Finscore Country Manager and Chief Operations Officer Christo Georgiev, Galang and Tatucu on the need to upskill workers and fine-tune their capabilities to keep pace with the rapidly changing industry.

Georgiev added that companies should strengthen people’s soft skills, which are often overlooked, stressing that these skills will help build bridges between society, organizations, the public and private sectors and the government.

Azzola earlier mentioned that the Philippines has an abundant pool of talent, excelling in various industries, but Tatucu said the lack of opportunities and poor working life in the country forces local talent to seek greener pastures outside the region, such as the national government, in collaboration with fintech companies, should work on improving.

See: “We’re probably number one globally in blockchain”: Inside the Philippine Fintech Festival

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