Full speed ahead

Last year was a year of recovery, this year will be the year of growth.

The Philippine fintech industry proudly achieved massive growth the past year – we hit the twin targets of the Bangko Sentral ng Pilipinas (BSP)’s Digital Payments Transformation Roadmap of banking 70 percent of the adult Filipino population and digitizing 50 percent of retail payments. Under the Philippine Development Plan 2023-2028, the government has also achieved its fintech target five years in advance, and is expected to increase exponentially next year.

Fintech-driven government regulations and frameworks are being prioritized by President Marcos. He recently signed RA 11967 or the Internet Transactions Act (ITA) that provides an additional protective layer for e-commerce transactions in the country, a large segment of the country’s digital economy.

These achievements increase our drive to work harder towards a shared goal of financial inclusion and digital transformation. For 2024, we remain optimistic as we anticipate positive trends for the whole fintech industry.

The fintech market is expected to grow by $44 billion this year, prompting the Philippine government to beef up its investments and transform the country into a digital hotspot. The digital economy generated over P2 trillion, a tenth of the country’s GDP. The fintech industry is forecast to continuously grow as the Philippines aims to be a $1 trillion economy by 2033, according to a study by S&P Global Market Intelligence.

Globally, this seems to be the overarching trend as well. According to BCG Global, fintech revenue is expected to boom up to five times more, soaring from $300 billion in revenue in 2022 to an astounding $5.1 trillion by 2030.

Filipinos are becoming increasingly dependent on digital solutions. The majority favor digital banks and applications for shopping, bills payments, remittances, and even loans. In fact, digital payments are set to lead the growth in the country’s digital economy.

This year, more Filipinos will explore the use of cryptocurrencies for their everyday needs – remittances, e-commerce payments, and investments. Earlier in 2023, the Philippine Securities and Exchange Commission (SEC) partnered with the University of the Philippines Law Center (UPLC) to explore regulatory mechanisms that will ensure safe usage and adoption of cryptocurrencies in the country. We are hopeful that with growing interest in the use of cryptocurrencies, the SEC is set to finally release the document.

The appetite for digital convenience is also being leveraged by the insurance and e-commerce industry. With the accessibility and affordability of offerings in digital platforms, Filipinos are embracing insurance as an essential. The compound annual growth rate of the insurance industry between 2021 and 2024 is 6.2 percent according to GlobalData.

Embedded finance will gain momentum as more Filipinos become exposed to applications that have embedded financial features, such as payments, rewards, discounts, and Buy Now, Pay Later (BNPL) services. With the Philippine government taking the lead in digitization through the launch of eGov and the marching order of the President to digitize national agencies, it comes as no surprise that embedded finance is becoming commonplace.

By 2030, APAC is forecasted to be a fintech global hub with revenues up to three times higher than any other region. The APAC region will see an impressive 27 percent jump - from $90 billion in 2022 to $600 billion in 2030. Latin America and Africa are poised for the fastest growth.

Digital payments and lending are forecasted to take center stage. Digital payments are slated to grow up to 20 percent, starting from $120 billion and growing to $520 billion in 2030. Digital lending is also anticipated to skyrocket by 24 percent, from $74 billion in 2022 to a whopping $400 billion in 2030.

The Philippines anticipates a surge in cross-industry collaborations, partnerships, and potential acquisitions. This trend is fueled by heightened consumer activity and the projected widespread integration of digital payment systems into the very fabric of Filipino daily life. The Philippines FinTech Map 2023 reports a 38 percent growth in the country’s fintech sector in less than two years.

Emerging open banking and open finance regulations are also accelerating fintech growth. By using APIs, banks can use third-party providers to better their digital products and services. According to McKinsey, APIs are expected to unlock up to $1.3 trillion in economic value annually by 2030. APIs improve productivity, reduce costs, and expand collaboration, enabling banks to expand personalized services to customers.

Generative Artificial Intelligence (AI) and data analytics will continue to redefine finance. Banks are harnessing data analytics, which pushes us to strengthen IT infrastructure to protect consumers and meet new demands. In sales, cross-selling, customer experiences, and credit decisions, we see more AI-powered models being leveraged to elevate services. Through AI, the world of finance now enjoys speedy computing and rapid data processing in large quantities. With this development, financial markets are set to radically develop, expand, and strengthen.

With the deep-learning system at its core, the “AI Bank of the Future’’ is set to offer hyper-personalized services to customers while lowering labor costs. For marketers, this means improved customer acquisition and satisfaction, monitoring, and credit decision-making.

As technology continues to be used in large-scale, banks will prioritize customer-centricity, innovation, industry collaboration, and sustainability in 2024. The immense growth of the finance sector is sustained by government regulations and frameworks. Moreover, with a fast-changing workplace culture, the way employees work and the approaches they use in engaging customers will be altered by the rise of AI.

We are full speed ahead in taking bigger strides in digitalization, boosting both the country’s economic growth and progress. However, we must not forget the evergreen

trend that remains in fintech: being in service of the customer. Fintech must continue to integrate the best of both worlds: merging technological prowess and human connection, all for the benefit of the people we intend to serve.

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Lito Villanueva is the Philippines’ award-winning thought leader on digital transformation and inclusive digital finance at scale. He is the executive vice president and chief innovation and inclusion officer of Rizal Commercial Banking Corp. (RCBC). He is also the founding chairman of Fintech Alliance.Ph, the Philippines’ largest organization of startups and unicorns collectively generating over 90 percent of digital transaction volume in the country today, and the global chairman of the South Africa-based Alliance of Digital Finance Associations. He was named a Circle of Excellence Awardee in the Asia CEO Awards, Mr. Fintech of the Philippines by BizNews Asia, Top Finance Leader on LinkedIn, one of the Philippines’ Top 30 Leaders on LinkedIn, one of the Top 100 Filipinos on LinkedIn and, Seamless Asia’s Top 50 Banking and Payments Leaders, and Top 100 Fintech Leaders in Asia, amonghis over 100 global accolades.