Manila is among the friendliest cities in the world for financial technology (fintech) startups, according to a global research firm.
Startup Genome released its annual Global Startup Ecosystem Report on May 9, placing Manila in its Top 10 Global Ecosystems of 2019. Manila also ranked among the Top 5 locations in the “activation phase,” or those which are developing.
Among these cities were Taipei in Taiwan, Busan in South Korea, Calgary in Canada and Frankfurt in Germany.
Strong English-language skills and well-established outsourcing industries in Manila were cited as key drivers that encourage investors to move their startup operations to the Philippine capital.
Fintech companies compose 15 percent of Manila’s startups, with the market expected to grow to $10.5 billion by 2022 from about $5.7 billion last year.
Fintech Philippines Report 2020: The digital payments boom in the Philippines
2019 saw a boom for the Philippines’ digital payments space, where e-money transactions jumped to 36% to reach PHP 760 billion in value, the strongest rise across all payments transaction types.
E-money transactions growth surpassed credit card and debit card transactions, which rose by 18% and 15% to reach PHP 1,229 billion and PHP 451 billion, respectively.
This shows a shift in the way Filipinos transact, given that this data is from pre-COVID-19, it is likely that by the end of 2020, the compiled data will reflect an even more substantial spike in the growth of e-money transactions.
COVID-19, a catalyst for fintech innovation
With the COVID-19 pandemic forcing the government to put the country under an Enhanced Community Quarantine (ECQ), the restriction of movement catalysed the usage of digital services. Banks and various digital financial services players all reported a massive spike in downloads of their mobile apps.
GCash, the mobile wallet arm of Globe Telecom and the Philippines’ leading mobile wallet and banking app, said in a statement in June that it saw transaction volume soaring by 700% year-on-year in May, with registration volume more than tripling during the first month of the ECQ.
Similarly, PayMaya, a subsidiary of Voyager Innovation and another popular digital payments platform, said in May that user registrations doubled during the pandemic as more people turned to online transactions.
COVID-19 was also the trigger for many exciting fintech developments coming from incumbents.
UBX, the fintech arm of UnionBank, developed and deployed a mobile-enabled ATM solution earlier this year, allowing rural banks and financial cooperatives across the Philippines to pay-out a wide range of government subsidies directly to beneficiaries in the underserved countryside.
In May, EastWest Bank launched the Philippines’ first homegrown fully-digital banking platform, Komo, after receiving approval from the central bank. Komo initially launched with a digital savings deposit product.
Most notably, Rizal Commercial Banking Corporation (RCBC) launched its “Taglish Superapp” in July targeting unbanked Filipinos and has quickly risen in number of downloads. In less than two months, RCBC’s DiskarTech saw more than 2 million downloads and topped the charts in August, beating out GCash who had consistently maintained leadership in the past.
On the regulatory front, a significant milestone was reached last year with the signing of the Innovative Startup Act, bringing with it a number of favorable measures for startups including tax breaks and the removal of registration barriers. This was followed shortly after by the filling of a new bill to regulate virtual banks, an initiative aimed at setting up the foundation for a new era in digital banking. Regulators are aiming for the proposal to be enacted later this year.
2019 also saw the Philippines’ Securities and Exchange Commission (SEC) approve an additional 37 crypto exchange operators and formulate rules for crowdfunding activities, further legitimatising these emerging fields.
Meanwhile, Bangko Sentral ng Pilipinas (BSP), the country’s central bank, approved a policy requiring the adoption of a National Quick Response (QR) Code Standard for payments, ensuring interoperability “not only on domestic but also on a wider regional or global scope,” the regulator said in October.
Fintech startups in the Philippines
The Philippines is currently home to more than 190 fintech companies, with lending (24%), payments (21%), digital wallets (12%), and remittances (12%) being the four most predominant verticals.
With only 29% of adults in the Philippines having bank accounts, it is unsurprising to see a large number of startups within the lending space attempting to tackle this issue.