LOW LITERACY continues to hold back the Philippines’ financial inclusion progress, even with digitalization helping bring banking services to the unbanked and underbanked.
“Digital technology is not the end-all and be-all, that is just the enabler. Digital will not solve the problem — it has to be the education component that would really drive adoption,” Fintech Alliance.PH Chairman and Rizal Commercial Banking Corp. Executive Vice-President and Chief Innovation and Inclusion Officer Angelito “Lito” M. Villanueva said in a panel discussion at the Asian Banking & Finance and Insurance Asia Summit held on Tuesday.
“It is also striking because we are seeing the proliferation of online lending providers, yet there is also an alarming rate of nonperforming loans because literacy faces a critical role. Filipinos are considered financially illiterate. This has been a challenge.”
Digital payments made up 52.8% of the volume of retail transactions in 2023, up from the 42.1% share in 2022, latest Bangko Sentral ng Pilipinas (BSP) data showed.
In terms of value, 55.3% of retail transactions last year were done online, also rising from 40.1% the year prior.
The BSP wanted at least 50% of the volume and value of retail transactions done online by end-2023 under its Digital Payments Transformation Roadmap and to bring 70% of adults into the formal financial system.
Mr. Villanueva said the second goal was not achieved. As of 2022, 65% of Filipino adults had financial accounts, according to available BSP data.
“So, it is still a work in progress,” Mr. Villanueva said.
The BSP is now working on the next phase of its Digital Payments Transformation Roadmap.
JPMorgan Philippines Head of Payments Sari D. Mortel said many Filipinos remain unbanked even with the high rate of mobile phone use in the country.
“We’ve always been talking about technology, right? But at the end of the day, there’s more to that than that. We’ve talked about collaboration; we’ve talked about education. But at the end of the day, it’s a combination of all,” Ms. Mortel said.
Adrienne Heinrich, Union Bank of the Philippines, Inc. AI and Innovation Center of Excellence head, said the lack of infrastructure is hampering financial inclusion in the Philippines.
“I think one important aspect that’s a bit different here in the Philippines compared to other more developed countries is the infrastructure,” she said. “More and more we see that digital financial services should be the future. There will be no turnaround from that.”
Boston Consulting Group Principal Boston Sitti Reyes said the Philippines’ progress towards financial inclusion has been sluggish, noting small businesses’ limited access to funding.
“I think we have not moved as fast as we would have wanted as a nation,” Ms. Reyes said. “We are way behind other nations, even the similar emerging markets like Indonesia, Malaysia. There is a lot that we can do.” — ARAI
