Digital payments technology is disrupting financial services globally, with outsized potential for positive change in the Philippines. The innovation and progression available means vast opportunities for the innovators, but risks for the incumbents — particularly the banks, who are seeing a high-margin business being eroded at pace.
Dheeraj Joshi, Regional Head, Payments Solution Consulting, Finastra commented: “With ever-increasing competition, constantly shifting regulatory and compliance obligations, evolving customer behaviours and expectations, increasing complexity and higher costs, banks are facing significant challenges. As a result, banks need agility, scalability and elasticity. With digital wallets and fintechs offering cheap, fast payments within easy-to-use apps, banks need to reduce their operational complexities and cost per transaction, whilst matching their digital competitors on customer experience.”
Tal Weiser, Managing Director Sales, Payments, APAC, Finastra, concluded: “We are in the most interesting era in the payments business. With changes being driven by shifting consumer demands, competition and business demand, as well as government initiatives, it’s a real perfect storm for the industry. If banks want to protect their revenue and stay relevant, they need to commit to modernization and investing in payments technology solutions that meet their growing and changing needs. Fortunately, banks do not need to do this on their own. Payments Solution provider like Finastra can provide the solutions they need to become agile, efficient, modern payments players. In the end it does not need to be ‘fintechs vs banks’, but fintechs working together with banks to push the industry forward.
Finastra is one of the largest fintechs in the world today, with its software used by 90 of the world’s top 100 banks. Finastra services over 8,500 customers across 130 countries, offering an unmatched depth and breadth of fintech solutions across Payments, Digital and Retail Banking, Lending, and Treasury and Capital Markets.
Asia is an extremely important growth market for Finastra’s global business, with 550+ clients and 4,300 employees in the region. Finastra has been servicing banks in the Philippines for three decades, including large incumbent banks and international banks with a presence here, as well as digitally native startups like Tonik — which runs on Finastra’s core banking platform. Finastra has around 900 in the Philippines and Finastra’s Payments business in particular is investing heavily in the country, recruiting people to manage clients and help even more banks and financial institutions accelerate their digital transformation.
One of the key drivers of digital payment adoption in the Philippines has been a significant shift in consumer behavior, but users have come to favor digital wallets like GCash and PayMaya for their superior user experience.
Such digital payment methods have also enabled more consumers to have access to financial services, which is a major advantage in a country with such as high population of people who do not have access to even a bank account. At this point, consumers have become used to the benefits of digital payments and digital players are innovating to compete for market share, which is putting pressure on banks.
Although regulation is usually seen as a source of challenges, the Bangko Sentral ng Pilipinas (BSP) has also been a significant driver of development in digital financial services. PESONet and InstaPay are digital payment schemes launched in 2017-2018 under the National Retail Payment System by The Bangko Sentral ng Pilipinas (BSP).
Their usage grew significantly during the pandemic as state-run pension disbursements, along with wider usage of electronic money (e-money) and Internet banking.
The value of transactions under PESONet, which involves high-value transactions, grew by 47 percent year-on-year as of July to PHP3.46 trillion. The value of InstaPay transactions during the same period likewise jumped by 37 percent year-on-year to PHP1.91 trillion, with volume rising by 25 percent to more than 300 million.
