Have you ever tried speed dating? It’s truly exhilarating. You have to woo your potential date in less than a minute, but most of the time everyone wants the same person you want!
These days, I feel like that one person in the room, every time I see all the promotions from payment and wallet companies.
But what does all this competition mean for the others in the room? For the customers? For the other players in the market? For the people who still use just cash? I wanted to answer a few of these questions.
That’s how I came about writing the first-ever edition of the ‘Fin-Sulat’!
Allow me to introduce myself. My name is Jerome, and I represent IDfy Philippines. I understand how difficult it can be to manage fraud prevention, compliance, and onboarding while trying to scale up.
I’ve taken the liberty to add you to this newsletter, as we’ve interacted with you before. In case you feel you do not wish to be included, you can unsubscribe via the link at the bottom at any time.
So to begin with, I would like to talk about the digital banks of the Philippines and how they are and will go on to change the face of the industry.
Let’s get started…
It’s Maya-rvellous
It’s everything and a bank! Offering a plethora of services will help Maya in deepening customer relationships. While other payment/wallet players will be dependent on their partners in the lending space, Maya would be able to lend easily.
Does this mean the Filipino market is for Maya to take? Not so quickly, there are definite challenges that the new digital bank must face.
For starters, converting existing customers to banking customers would not be an easy task. Additionally, compliance would make it harder to keep up with payment players like GCash or PayMongo when it comes to customer experience.
GCash is king
With the most number of users across the country, GCash has chosen not to be a Digital Bank. This move by the payments leader has the potential to change the whole game. Unlike digital banks, GCash would be able to focus on customer loyalty by focusing on customer experience. However, their merchant experience is not at par. Merchants are key to the growth of all these players. You see, it’s a love triangle.
So, who gets to take the prettiest girl to the prom?
Who will win the Filipinos over? The traditional banks? The foreign payment players? Maya? Or the digital banks?
The answer would be BSP.
Creating an environment where all these players would fight for the customer’s attention, would truly drive BSP’s goal of financial inclusion. In the race to onboard as many Filipinos as possible onto their platforms, all the players would eventually get the average Filipino the access to financial services they deserve.
What about the happy ending?
While all of us should celebrate the giant leaps that the financial sector of the Philippines is taking under the reign of BSP, we should bear in mind that there will be some hurdles in the path to happily ever after.
One must keep in mind that the economy will grow when lending grows. So, most of these players will be entering the lending space, if they haven’t already. Coupled with the rise in the average Filipino who can borrow, it’s a market ripe with opportunity.
How do you lend to someone who has never been in the system, though? They will surely not have a credit score. There are some alternatives one can use, however, like TrustingSocial or FinScore. Where it extrapolates the data from a user’s phone. They track the record of payments towards phone plans and utilize that to create a score that can be used as a proxy for a traditional score.
But this doesn’t paint the complete picture for the lender. Because this simply tells you the willingness to pay and not the capacity to pay. So, additionally what a lender needs to vet is proof of income which might be payslips, bank account statements, or income tax returns. That is if one is lending to an individual.
What about merchants though? The lending players need to have customers as well as merchants onto their system and ready to borrow. For merchants, the income proofs can be of an even wider variety. Verifying documents that are not standard will be the key in making the Filipino market ready for this growth spurt.
What do you think? Do write back to me at jerome.ocampotan@idfy.net to let me know your comments and suggestions.
BSP Governor talks about harnessing potential for a better post-Covid Philippine economy.
Benjamin E Diokno, in his speech at HSBC, talks about the state of the Philippine economy post-COVID. He also talks about the blueprint launched for transforming the Philippines into a cash-lite society. Under the blueprint, called the Digital Payments Transformation Roadmap, the BSP aims to achieve a shift of at least 50 percent of retail payments to digital transactions.
Read about it here.
World Bank’s Yoonyoung Cho and Jonathan Marskell weigh in on the impact of digital transformation in an interview for World Bank Blogs
Cho and Marskell give their inputs on the importance of having a foundational ID system, the effect of shifting from cash to digital payments, the transformational digital trilogy, and the challenges in addressing digital eco-system gaps and mainstreaming digital SP delivery among other things.
Read about it here
BSP’s incoming governor hints at two hikes
Felipe Medalla, who is set to take over from Benjamin E Diokno soon, said that in order to manage the inflation rate that is affecting the Philippines at this point. The two hikes are set to raise the benchmark rate to 2.75% from the current 2.25%.
Read about it here.
