Financial Crime World

Philippines’ Fintech Boom: Traditional Banks Join Forces to Compete

The Philippines’ fintech sector is experiencing a surge in growth as traditional banks and startups alike strive to innovate and stay ahead of the curve. In recent months, BPI, one of the country’s largest banks, launched its e-wallet Vybe on its mobile app, offering a range of services similar to popular digital wallets GCash and Maya.

Traditional Banks Join the Fintech Bandwagon

UnionBank has introduced UnionDigital Bank, a fully digital financial service aimed at underbanked consumers. This marks a significant shift towards digital banking in the country, as traditional players seek to compete with fintech firms that have disrupted the status quo.

Challenges and Opportunities for Growth

Despite the growing competition, no dominant player has yet emerged outside of the mobile payments subsector. Six digital banks have launched operations in the Philippines, but none are currently lending at scale. GCash and Maya, two popular digital wallets, have expanded their offerings into lending, investment, insurance, and marketplace services.

To reach their full potential, fintechs and digital banks must overcome unique challenges, including:

  • Transforming their operations to improve profitability and sustainability
  • Partnering with established domestic players to gain valuable insights on local market conditions

Opportunities in Rural Areas

The Philippines’ fintech landscape offers significant opportunities for expansion, particularly in rural areas where traditional banking infrastructure is limited. Recent changes to onboarding requirements and agent-banking rules are designed to enable digital service providers to maximize the impact of the country’s limited rural banking infrastructure.

Entry Point for Foreign Firms

For foreign firms looking to enter the market, acquiring a small rural bank and repurposing it for digital banking may be the simplest way to access the Philippine market. Over 400 rural banks are eligible for acquisition, with many already having been sold for less than $5 million.

However, navigating the Philippines’ fintech landscape requires careful consideration of:

  • The country’s structural limitations
  • Evolving regulatory context
  • Relationship to the national economy

According to Guillaume de Gantès, a senior partner at McKinsey: “An experienced partner with a deep understanding of the local context can enable new entrants to outmaneuver foreign and domestic competitors and position themselves for decades of growth in a dynamic emerging economy.”

Conclusion

With its vast greenfield market and rapidly shifting landscape, the Philippines presents an attractive opportunity for fintech service providers. However, as de Gantès notes: “A keen awareness of the challenges facing fintech service providers will offer a critical advantage.”