How to set up a fintech in the Philippines

Michael Correa sheds light on the key opportunities in the Philippine market for aspiring fintechs, according to the findings of the 2018 Westpac EIU Fintechs in ASEAN Report.

1. Based on the recent Fintechs in ASEAN Report, why do Fintechs typically choose the Philippines as a base for their operations?

Fintechs typically choose the Philippines to increase their customer base, gain access to capital and to take advantage of regulatory arbitrage.

Housing only 9 per cent of all fintechs in the seven ASEAN markets, Philippines is a small fintech ecosystem that has a large potential for future customer growth with a smartphone penetration rate (15 per cent) below the ASEAN average and 35 per cent of the population aged 15 and above holding a bank account. Philippines's below average ICT capabilities and financial inclusion rate presents a huge opportunity for technological change that can enhance the support for fintechs.

2. What is the market outlook/opportunity for Fintechs in Philippines?

While GDP per head and personal disposable income remain relatively low, living standards in the Philippines are expected to gradually improve over the forecast period, creating new opportunities for foreign fintech investments.

Severe income inequality is also expected to persist as a challenge for the government, with disparity between the richest and poorest households being particularly acute in urban areas. Such circumstances will require Fintech firms to streamline product and service portfolios to match different consumer needs.

For example, while richer households may demand discretionary consumer goods and mature fintech services, the vast majority will require solutions that help fulfil primary needs.

However, with a strong macroeconomic position and relatively open market, the business environment in the Philippines improved by two places in the past year. It now ranks 50 th out of 82 countries globally, and is increasingly attractive to foreign investors in fintech and other sectors.

3. What are the key challenges Fintechs in the Philippines face, and how can these be overcome?

Some of the major challenges in the Philippines include navigating the regulatory environment and the restricted market opportunities presented due to poor banking penetration. For example, in the Philippines, regulatory support is not effective, and improvements need to be made in the publication of guidelines such as those promoting secure cloud computing.

To overcome this, the fintech businesses we surveyed all echoed the importance of leveraging partnerships with commercial and non-commercial organisations, and even competitor organisations to gain new ideas and advice on market and regulatory knowledge.

In fact, forming a distribution or other strategic partnership was the most common measure taken among companies surveyed (cited by 44 per cent of survey takers) to successfully crack the ASEAN markets, including the Philippines.

Benefits of such partnerships may include market intelligence, technology exchanges, referrals to potential customers, talent and funding for projects. When businesses with the right values enter partnerships, everyone benefits.

For more insights on Fintech opportunities in ASEAN, please view the full report, Fintech in ASEAN: Unlock the Opportunity. The writer is general manager, Asia Pacific, for Westpac.

If you are interested in finding out more about setting up a Fintech in other Asean countries, consider visiting:

- Setting up a Fintech in Singapore

- How to set up a Fintech in Malaysia

- How to set up a Fintech in Indonesia