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Banks (Finance)

Fintech Companies Threaten to Overtake Banks in Retail Services in the Philippines

Strategic Insights

— 1 min read

In a recent report released by Moody's Investors Service, fintech companies in the Philippines have the potential to overtake banks in retail services. The report highlights the growing popularity of mobile wallets, with more Filipinos using digital payments to access financial services. As a result, the mobile wallet market has grown significantly, with a 61% increase in active electronic money wallets in the first nine months of 2020 compared to the same period in 2019. This trend threatens the competitiveness of Philippine banks, which rely heavily on retail deposits and fees from services like remittances.

Key Takeaways:

  • Fintech companies and digital-only banks are threatening to gain on conventional banks in key areas of retail business, such as depository services, credit cards, remittances, and unsecured lending.
  • Mobile wallet penetration has surpassed that of bank accounts, with a growing number of Filipinos using digital payments to access financial services.
  • The mobile wallet market grew significantly last year, with a 61% increase in active electronic money wallets in the first nine months of 2020 compared to the same period in 2019.
  • Remittances to the Philippines totaled $29.9 billion last year, accounting for 8.3% of the country's gross domestic product and generating $1.4 billion in fees for banks and money transfer companies each year.
  • Fintech companies like GCash and Paymaya have established franchises in the country, making it difficult for banks to gain market share.
  • The Philippines presents a big untapped opportunity for fintech companies, with around 70% of adults missing access to banking and financial services.
  • Mobile wallets offered by fintech companies tend to have better functions and features, resulting in stronger customer loyalty and higher retention rates.

Statistics:

  • $29.9 billion: Totals of remittances to the Philippines last year
  • 8.3%: Share of remittances in the country's gross domestic product
  • $1.4 billion: Fees generated by remittances for banks and money transfer companies each year
  • 61%: Increase in active electronic money wallets in the first nine months of 2020 compared to the same period in 2019
  • 70%: Percentage of adults missing access to banking and financial services in the Philippines

Sources:

  • Moody's Investors Service Report (no date provided)
  • The Manila Times (Manila, Philippines)
  • Tribune Content Agency, LLC

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