More opportunities for collaboration are opening up for banks and other financial institutions with financial technology or ?fintech? firms in the Philippines as way of driving their growth and addressing financial inclusion gaps nationwide, a local fintech executive remarked during the recent BankTechAsia 2016 conference held in Manila.
While fintech firms have ushered an age of disruption in the banking and finance industry in developed markets such as the United States and European countries, the situation is starkly different in emerging economies such as the Philippines.
?Fintechs in emerging markets are not the enemy, but a strategic ally of financial institutions. I call it ?finbiosis?, or a mutual co-existence that leverages on each of our strengths — technology and innovation for fintechs and financial expertise and capacity for banks,? explained Lito M. Villanueva, CEO at FINTQ, the financial technology unit of Voyager Innovations, the digital innovations arm of PLDT and Smart.
?Finbiosis? the way to go
In emerging markets such as the Philippines, fintechs do not aim to disrupt. Instead, fintechs here enable cost and service efficiencies for partners, engage with regulators to adapt to the emerging digital landscape, and empower consumers with frictionless experiences leveraging on mobile, Villanueva said.
Collaborating with fintechs also helps in addressing financial inclusion gaps besetting the country today, as 69% of the population remains unbanked and only 1% of payments are done electronically.
?There is a huge opportunity for fintech players to push their platforms that will address these gaps, and likewise, for banks to expand the reach of their products and services without heavy capital expenditures,? Villanueva noted.
Such is the case for current FINTQ bank partner Land Bank of the Philippines, which has deployed the Landbank Mobile Loan Saver (LMLS) solution to digitize the salary loan application process for government employees. Using only their mobile phones, employees can apply for a salary loan and get quick approval updates within hours.
Through LMLS and mobile technology, Landbank significantly accelerated its salary-based lending velocity by as much as seven times, allowed 20% of applicants to apply for a loan outside banking hours, and reached 23% of borrowers in low-income cities and municipalities where no brick-and-mortar branch is present.
For the past 17 months since LMLS was launched in January 2015, Landbank?s digital loan facility has already disbursed in excess of P8.72 Billion with over 1,100 participating government agencies. It has since expanded to cover employees in the private sector and even Globe subscribers, making it a telco-agnostic digital lending facility.
Addressing millennial habits
In the same vein, financial institutions face a growing challenge to accelerate their digital transfromation in light of tectonic changes in the consumer landscape, driven by digital-savvy ?millennials,? a third of which do not believe they need a bank at all, according to the 2015 Millennial Disruption Index, putting banks at the highest risk of consumer disruption.
?At the end of the day, financial institutions must embrace the challenge of digital evolution to keep their relevance in the market. And the good news is, Philippine fintech companies are ripe and ready to collaborate,? Villanueva added.