The Philippines has one of the highest internet usage in the Asia Pacific region, with daily internet usage being about 10 hours, much higher than most other countries. It’s internet penetration stands at 68%.
No Open Banking
The Central Bank of the Philippines approved their Open Finance Framework in June 2021, aiming for consent-based data portability, interoperability, and collaborative partnerships between financial institutions and Fintech entities, while also ensuring the protection of personal data. They aim to keep it customer focussed, enabling customer access of their own financial data. It is a vision beyond Open Banking, covering insurance, pensions, investments as well as banking products and services. This followed the Digital Payments Transformation Roadmap of 2020-2023, which aimed to push the proportion of digital payments made to over 50%, and the number of adults onboard a formal financial system, using a payment or transaction account, to 70%. The Philippines has highlighted developing a digital payments infrastructure with interoperability at its core. COVID lockdowns during 2020 created a marked increase in digital payments, accelerating a trend already begun, with the Financial Inclusion Survey of 2019 showing an increase of e-money account holders from 1.3% in 2017 to 8% in 2019 of the adult population.
The government has made it a priority for its digital inclusion strategy to make bill payments interoperable, and improve cross-border remittances.
In February 2022, the National Strategy for Financial Inclusion 2022-2028 was launched. About 70% of Filipino adults are financially excluded, as in, they do not possess a transaction account. “Financial exclusion disproportionately affects millions of Filipinos in the lower income classes and those who are unemployed, less educated, and belonging to the younger generation. Other underserved and unserved segments include senior citizens, migrant workers and their families, persons with disabilities, indigenous peoples, forcibly displaced persons, those who are excluded due to their religious beliefs, and other marginalized segments. Financial exclusion is also prevalent in the agriculture, MSME, and startup sectors as well as among informal workers.”
45% of people without a bank account stated that they didn’t have enough money to justify one, and just over a quarter said they lacked the necessary documentation to open one. A quarter of respondents stated they had no need for a bank account. In response to the 2015 Financial Inclusion Survey, the BSP created the Basic Deposit Account (BDA), a ‘no frills’ bank account, requiring a very low deposit and basic identification. Yet a significant number of people are unaware of the account and the cash agents, set up in retail spaces for easier access, created to allow access to it.
The Philippines has a very low median age of 25.7, with a third of the country as millennials, leading to an expectation of an increase in the workforce, and easier adoption of digital technologies. More Filipinos own mobile phones than financial accounts.
PhilSys, the national digital identity system, was signed into law in 2018 and is part of the national digital inclusion strategy. PhilSys addresses the lack of identity documents as an oft-cited barrier to account opening. As of end-2021, 7.2 million PhilSys registrants had applied for an account.
The Philippines has a high level of rural population, disproportionately exposed to climate change and natural disasters. The banking infrastructure is lower in rural areas, as well as internet connectivity and basic infrastructure such as roads, water and power supply.
The Bangko Sentral ng Pilipinas (BSP) carries out a biennial financial inclusion survey, measuring the access, usage and quality of the financial services.
In 2018, the Philippines passed their Identification System Act, to create an obligatory identity for all citizens and resident aliens. One of the main purposes of the identity is for social inclusion as services become more digital.
In November 2021, the national bank urged rural banks to embrace the National Retail Payment System. There were 3,139 rural banks nationwide that serve MSMEs, agricultural, and other vulnerable sectors with only 32 offering electronic fund transfer services. In April 2022, the Agent Registry for Cash Agents was launched. This showed a recognition of the role of these cash agents- often retail outlets, such as sari-sari stores, convenience stores, supermarkets, pharmacies, and pawnshops, that provide basic banking services such as cash deposits, cash withdrawals, balance inquiry, fund transfer, and bills payment, have in increasing financial inclusion for those unbanked, particularly in rural communities.
The Philippines has 4,450 microfinance nongovernmental organisations, over 84 thousand e-money agents, and over 58 thousand cash agents. E-money, through the use of mobile wallet apps, is used more prevalently in the Philippines than credit cards. 69% of adults have a mobile phone.