Of Pinoy Fintech Start-ups and My Son’s Birthday

Of Pinoy Fintech Start-ups and My Son’s Birthday

My son Ziggy turned one yesterday and it’s such a bummer that most people aren’t around. Courtesy of the COVID-19 pandemic, our supposed anticipated “family event of the year” was surely affected.

 

Instead of a bigger party that we had hoped for my son’s first birthday, due to the community quarantines, most of our relatives just could not join us physically. But what I find interesting though was that, my child’s aunts and uncles who were from afar, sent their “money gifts” online instead - through their phone’s GCash, to be more specific.

 

A lonely pandemic birthday celebration for my son Ziggy.

 

And it sure got me thinking how easy and accessible it is to send money now. I remember back when we were young, we would go house-to-house during Christmastime for the aginaldos.

 

I’m pretty sure, other youngsters these days are asking for their money gifts online or probably would be sending the QR codes to their ninongs or ninangs. It’s really amazing that in today’s digital environment, traditional transactions like sending money, are now at the touch of a button. And I can’t blame them. Most of the time, it is difficult to interact with traditional banks, hence, online financial transactions are the better options.

 

With the on-going process of recovery from the COVID-19 pandemic, the numbers for remittances and e-payment systems skyrocketed all over the country due to the localized lockdowns and community quarantines. And in a country where smaller businesses reign supreme, fintech is extremely critical.

 

Short for financial technology, “fintech” delivers financial services through software, such as online banking, mobile payment apps, or even cryptocurrency.

 

It has indeed set the tone for our current global economic landscape. In a study by the EY Fintech Adoption Index three years back, on average, there is already a 33% adoption rate of fintech for 20 major economies. And Philippines’ very own capital has been ranked among the top 40 emerging start-up ecosystems in the world, according to a 2020 report.

 

The Philippines has seen steady growth and development in its financial technology and larger start-up sector, placing 31-40 on a list compiled and published in the Global Startup Ecosystem Report (GSER). We share the spot with 9 other major cities including Houston, Texas, and Xiamen, China. 

 

Some figures from last year also show that the Philippines has more than a 50% increase in e-commerce transactions. It is indeed true and I can attest to this personally. Some of my online purchases for my little one are ordered online from Lazada and Shopee.

 

We see this transformation in our day-to-day living. We now reload our “e-wallets”, order food via fast food sites, or check our payrolls through online banking. Regalos (or donations) are now extended by sending the corresponding amounts via GCash as for our case.

 

Fintech companies are on a roll. Recent figures for the established Globe GCash payment system show that they currently have around 20 million accounts pre-pandemic. That’s indeed astronomical and then recently, they have opened GCredit in collaboration with ATRAM which established a mobile credit line on its app that Pinoys can use to pay for goods and services.

 

The past year has also shown great strides in e-commerce and online selling transactions. Lazada and Shopee had reported increased sales when the lockdowns were implemented in the second quarter of last year. Proportional to this is the widened utilization of digital banking technologies in the country. A digital bank that partnered with GCash app, CIMB Bank, has boasted  growth of 3 million accounts during the pandemic.

 

In the Philippines, fintech continues to activate comprising around 15% of all Pinoy startups. Last year, the Singapore-based tech firm BCB Blockchain entered into a partnership with QBO Innovation Hub and Animo Labs to provide start-ups planning and financing.

 

Filipino fintech startup SquidPay Technology sure made news in the Philippine Stock Exchange last year by acquiring a 55 percent stake in Premiere Horizon Alliance Corp ($PSE:PHA) to be used as a vehicle for its prospective backdoor listing at the Philippine Stock Exchange. Launched just May last year, SquidPay provides contactless payments services for Filipinos through stored value cards, QR codes, and a mobile application.

 

But while these updates in the fintech landscape in the Philippines are well and good; there remains some bigger issues - the narrowing of the digital divide and the creation of a better fintech ecosystem.

 

Digital transactions increased to comprise 20% of the total value in 2018 (from just 8% in 2013), these figures are still comparatively low. A study made by the Bangko Sentral ng Pilipinas showed that only 29% of Filipino adults had formal accounts in financial institutions as of 2019. In a study by HSBC, they indicated that in the country around 53% of smartphone users do not own a credit card.

 

That’s why the central bank hopes that by 2023, 70% of Filipinos will have access to a formal account. And they also - get this - target to have 50% of transactions done digitally in the span of two years. This is a big step up for fintech to fill the void for traditional services.

 

 

Like what people always say, however, the devil is on the details. Recent innovations, such as peer-to-peer borrowing, present risks like in situations where someone defaults on their loans. Cyber attacks and privacy leaks also have been on the rise together with the digitalization of most platforms. The improvements would also force lenders insurers, asset managers to step up their game in their respective industries.

 

Is our current government amending policies to foster digital innovations? That remains to be seen in the coming years. Government initiatives and support are seen as extremely important in fostering a nurturing start-up fintech environment.

 

Indeed, fintech has reinvented my mindset towards digital money and this surely has had an impression on my son’s young life. The unprecedented control and flexibility with financial technology change economies around the world. And it will remain so for many years; that’s why I am expecting to receive more digital pesos on my son’s future birthdays.