AI is driving the Philippine FinTech revolution

The global FinTech market is expected to reach $332.5 billion by 2028, according to the forecast by Vantage Market Research.

This will rise from $112.5 billion in 2021, showing a compound annual growth rate (CAGR) of 19.8% over the forecast period. Integrating artificial intelligence (AI) and effective data management with business operations could spark a Philippine FinTech revolution that will transform industries, according to AI-powered decision-making platform Provenir.

“The pandemic and its restrictions caused a huge generational surge in the emergence of digital services and has required businesses to adapt at a very high speed,” said Provenir General Manager for Asia-Pacific Bharath Vellore.

To be a part of this growth, organizations are expected to offer financial services to customers to generate alternative revenue streams, customize their customer journey and improve the overall user experience soon.

This was shared by participants at the “FinTech: A people’s revolution in the Philippines” forum attended by some of the leading companies in the ASEAN and Philippine FinTech space.

The future of FinTech

During the forum, Digital Pilipinas and World Fintech Festival PH co-founder Amor Maclang asked the panelists if the future of FinTech lies in companies’ ability to harness the potential of data, and she received an overwhelming confirmation.

In addition, Vellore predicted that the future of FinTech is the conversion of any business to FinTech: “AI in FinTech is opening the doors for digitization of credit-rich verticals and diversifying products and opportunities. Agility and speed of personalization play a critical role in providing personalized offers to customers, helping hyper-growth,” he said.

However, FinTech is not limited to digital banks and neobanks, but expands to include embedded and open financial services that are becoming more and more widespread.

The driving force for innovation and safety

“With so much innovation happening in the FinTech space, the question arises as to how we can be more responsible and secure in our digital transaction for both businesses and consumers,” Maclang said.

It was revealed that smart tools such as AI can transform large amounts of data into valuable insights such as consumer patterns that help with fraud detection and business risk decisions, as well as AI fraud detection is fast, efficient and effective.

“AI also helps organizations discover new patterns in data that enable them to serve a much wider base of people,” adds Vellore. Moreover, AI can reduce transaction costs, improve data management and increase employee productivity.

Financial inclusion through alternative data

Through AI, patterns can be identified in a wide range of alternative, traditional, linear and non-linear data. It can also provide highly accurate decisions even for consumers considered “thin-file” or those without files. This promotes financial inclusion as FinTech companies and financial service providers can support the unbanked, who are more than 70% of the population in Southeast Asia.

“AI can create alternative credit scores for the consumer loan space,” Vellore said. Alternative credit scoring can replace the traditional FICO score used by banks for consumer risk assessments and legacy underwriting, which are slow processes in lending transactions.

‘Superapps’: be many things to your customers

Considering the wave of FinTech solutions that target different users, 77% of financial institutions have focused on innovation to strengthen customer retention. These days, AI is prominent in mobile app features like “frictionless” customer onboarding via facial recognition. However, this technology goes beyond the superficial.

AI can reveal complex and unexpected variables that cannot be derived by manual analysis alone. It can “advise managers on how to use the information to increase profits.”

“Through AI, an e-wallet is no longer just a channel to pay bills, but is now also a bank, containing your investment portfolio, insurance policies and much more. A ‘super app,'” Vellore said.

Progress through AI adoption

Last year, the Department of Trade and Industry launched a national AI roadmap, making the Philippines one of the first 50 countries worldwide to do so. The goal is to transform the country into a Southeast Asian AI powerhouse and leverage AI to boost local businesses’ regional and global collaboration.

“Anchoring the nation’s progress with artificial intelligence is a must. The collaboration between the public and private sectors, the academies and our ASEAN partners has greased the runway towards the movement of money through the power of data,” Maclang said.

FinTech done right will propel not only our country but all of ASEAN to the next evolution towards digital transformation.