FROM its early beginnings of traditional brick-and-mortar transactions to the rise in automation as seen in the proliferation of automated teller machines (ATMs), the global banking industry is facing yet another new wave of innovations to make financial management faster and more efficient.
Amid the rise in global connectivity through the Internet, financial innovations are evolving, and financial technology—or the so-called fintech—is becoming the new mode of doing business among banks and financial institutions all over the world.
In recent years, advanced technology providers have diversified into the world of financial services—with two of the largest competing technological giants, Google and Apple, now providing digital wallet services.
Google Pay, for example, describes its electronic wallet service as “a fast, simple way to pay on sites, in apps, and in stores using the cards saved to your Google Account.” Google also says the service “protects your payment info with multiple layers of security and makes it easy to send money, store tickets, or cash in on rewards—all from one convenient place.” Apple Pay, meanwhile, claims that its service “is even simpler than using your physical card, and safer, too.”
Earlier this year, Facebook announced its venture to put up “Libra,” a blockchain digital currency.
In the Philippines, fintech has transformed the delivery of financial services—from branch banking to online banking, paper-based money to electronic money, and face-to-face customer verification to technology-aided know-your-customer process.
The Philippines is positioned to make its own financial technology innovations as Internet penetration continues to expand and the population—which is largely composed of young adults—are now spending a lot of time online. A recent report said that Filipinos spend an average of 10 hours a day on the Internet.
However, poor Internet connection and infrastructure hinder technological advances in the country, which has a great potential to take advantage of huge online business opportunities.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi Fonacier told the BusinessMirror that good infrastructure and fast Internet connection are crucial for the country to reach its potential when it comes to digital innovations in the financial sector.
“Having a good public infrastructure such as high-quality and affordable Internet connection for the populace would provide a suitable environment for fintech products and services to flourish,” Fonacier said.
Recent data, however, reveal a bleak outlook. Despite high costs, the Philippines’ average connection speed was only at 2.8 Megabits per second (Mbps) in 2015. This is significantly lower than the global average connection speed of 5.1 Mbps, which makes our Internet speed the second slowest in the Asia-Pacific region based on data from the International Telecommunication Union.
Spur of creativity
Amid the growing pains of connectivity in the country, the ability of Filipinos to create, based on what they have, is astounding. The BSP said banks and financial technology companies are increasingly finding ways to deliver new services that only need little connectivity.
“There’s still considerable momentum when it comes to fintech development because fintech players are able to design products and services that can run on low Internet bandwidths,” Fonacier told the BusinessMirror.
“This is also the case for banks and other financial institutions, whereby the design and delivery of products and services primarily takes into account the Internet connection and speed for certain markets/areas,” she added.
A recent example is banking solutions provider PearlPay’s tie-up with a rural bank in Dagupan. PearlPay signed a pilot program agreement with BHF Rural Bank Inc. (BHF) for the use of cloud-based technologies to deliver services to customers.
The agreement allows the bank to access cloud-based technologies such as core banking solutions (CBS), agent banking solutions (ABS), and eWallet solutions—all of which are designed to reach customers with limited or no access to the Internet.
Earlier this year, Philippine-owned business group Transnational Diversified Group (TDG) and Japanese shipping firm NYK Line have joined forces to develop a fintech platform that will allow electronic money transfers without an Internet connection.
The program would allow seafarers and vessels’ masters to make electronic money transactions aboard their ships.
MarCoPay takes its name from “Maritime Community,” and seeks to provide its target market with a quality product that can help them strategically manage their finances. MarCoPay, the brainchild of NYK and TDG, comes in the form of an app, which will be launched in January 2020.
MarCoPay will use QR codes that can be used to complete pre-boarding procedures, receive and convert salaries into digital currency, and this e-money can be used for onboard purchases and for remitting money to their families.
Fintech roadmap
The BSP said it continues to open its doors to innovations through its fintech roadmap. “Likewise, the BSP collaborates with other financial regulators, through the Financial Sector Forum FinTech Committee, to ensure fintech policy consistency, prevent regulatory arbitrage and promote expansion of fintech innovations,” Fonacier said.
“As you know, the BSP is spearheading a number of major initiatives. All of these initiatives necessitate a stable, reliable, affordable and high-quality Internet connection. As such, the BSP remains committed in working with the Department of Information and Communications Technology [DICT] to push the agenda forward,” she added.
“The BSP understands that the DICT is already working on the National Broadband Plan formulated in 2016, which aims to address the longstanding issue of Internet connection quality in the country. The plan will provide Filipinos with wider access to high-speed Internet connection and better services, which can spur economic activity, particularly in the e-commerce and digital space,” Fonacier said.
Image credits: Sarinya Pinngam | Dreamstime.com, Nonie Reyes