Fintechs could overtake Philippine banks in retail segment: Moody’s

Banks' slow development of digital financial services may just give fintechs an edge.

Conventional banks in the Philippines are at risk of getting surpassed by financial technology (fintech) companies in key retail segments amidst their slow progress in digitising their services and lack of accessibility, Moody’s Investors Service reported.

Social-distancing measures due to the pandemic are spurring the adoption of digital financial services. Despite this, banks have been notedly slow to develop new digital services, such as digital micro-loans and mobile wallets, to attract new customers from the unbanked population. 

"Fintech companies and a new breed of digital-only banks threaten to surpass conventional banks in key retail banking areas, such as credit cards and remittances, with products that are more accessible and easier to use. The country has a largely untapped market because about 70% of adults in the Philippines lack access to financial services," Moody’s analyst Joyce Ong said.

Instead, banks prefer to maintain the current business model that focuses mostly on the corporate segment and to some extent, the more affluent retail segment. 

A failure to respond quickly to the emergence of fintech companies will make it more difficult for Philippine banks to acquire new customers and create new revenue sources, especially from the large unbanked population, Ong warned. Already, it will be challenging for banks to win market share from fintech companies with established franchises.

Whilst Philippine banks are corporate-focused, their competitiveness in the retail segment is critical given its huge growth potential, Moody’s reported. At the same time, retail deposits make up a significant part of banks' funding, and fees from services such as remittances account for a substantial share of their non-interest income.

Increasing access to financial services to the unbanked population will also widen banks' potential pool of customers, the rating agency added.

Photo courtesy of Alexes Gerard

Get Asian Banking & Finance in your inbox
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Banking leaders admit that they are at risk of ceasing to exist in 5-10 years.
It creates a one-stop ecosystem that connects its users to EV car dealers.
It enables end-to-end visibility for both the user and their clients.
FIs role as the middleman is under threat as tech firms mull offering financial services.
The final order book saw that most demands come from the UK and EMEA.
Fund transfers from India to Singapore will only need mobile phone numbers.
The alliance, made up of 35 NGOs, noted the bank’s alleged lack of a public policy to reduce coal investments.
Banks’ credit costs are expected to undershoot their guidance.
BEA highlights hiring plans, whilst Citi says it will offer 100 types of wealth products under WM Connect.
Stress test shows NPL ratio likely to rise, but not to levels PBOC expects, the ratings agency said.
Lenders will have to reduce cross-border fees once CBDCs become more mainstream.
Users will be able to set spending limits and block cards, amongst other features.
And Mastercard bets on crypto with acquisition of CipherTrace.
He Xingxiang is suspected for “severe discipline and law violations.
Two local digital currency exchanges said that none of the top four banks would do business with them.