THE PHILIPPINES is one of the countries with the biggest potential in digital banking in the ASEAN given its wide unbanked population, although the coronavirus crisis may have hit possible borrowers’ profiles, Fitch Ratings said.
“Fitch Ratings believes that the Philippines and Indonesia have the largest market potential among the six major ASEAN markets due to their large unbanked segment and low household leverage,” it said in a note sent to reporters on Thursday.
About five million Filipinos have gained access to a formal account between 2017 to 2019, data from the Bangko Sentral ng Pilipinas released in July showed. This left 51.2 million adult Filipinos still unbanked or about 29% of the 72 million adult population, an improvement from the 23% in 2017. The study said the biggest hindrance to opening an account is the lack of money.
“The pandemic-induced economic crisis is likely to affect digital banks’ target segments more significantly given their generally weaker borrowers’ profile,” Fitch said.
The lack of digital infrastructure seen in the Philippines as well as in Indonesia is also a hindrance for neobanks, it added.
ING Bank N.V. Manila and CIMB Bank Philippines in 2019 started their digital-only retail banks in the country. Both lenders allow consumers to open accounts via a purely digital process and offer deposit rates of up to 4% to lure new clients.
Robocash Group, which was formerly doing financing in the country, has also expressed its interest in establishing a digital bank in the Philippines this year.
Fitch added that a viability requirement, paired with “incremental asset size and deposit restrictions” for new digital banks will help keep level competition.
“Philippines’ draft digital bank policy exposure indicates that the regulator is also planning to impose a similar business viability requirement and we expect neighbouring countries’ regulators to also adopt a similar approach in regulating digital-only banks,” it said.
House Bill 5913 which will be known as the Virtual Banking Act of 2020 if passed, mandates digital-only lenders to have a minimum capital of P20 billion to be raised in four years. The bill has been pending in the Lower House since January. — L.W.T. Noble