Fitch Owned Research Firm Shares Positive Outlook for Philippine Fintech Sector

Fitch Owned Research Firm Shares Positive Outlook for Philippine Fintech Sector

by August 9, 2023

Business Monitor International (BMI), a research firm owned by Fitch Group that provides country risk and industry analysis, is bullish on the Philippines’ fintech sector, arguing that despite risks present in the domestic scene, including rising inflation, a weak regulatory system and low living standards, the potential for generating profits and return on investments was high and outweighed the risks.

In a commentary released on July 13, 2023, the research firm looks at fundraising plans of Southeast Asian telecommunications operators Malaysia’s Axiata Group, Indonesia’s Telkom Indonesia, and the Philippines’s PLDT as they seek additional finance for their individual digital payments businesses.

BMI said it had “a broadly positive view” of these efforts, highlighting these markets’ growing need for digital service sophistication and broader rollout. The firm also noted that digital-first micro and small businesses were struggling to secure finance from traditional sources as inflation continues to soar, providing ample opportunity for alternative lenders and fintech services companies to fill the gap.

Of the three countries, BMI said that Malaysia had “the most conducive market for the incubation and development of fintech providers” and presented limited risks for prospective investors. In the Philippines and Indonesia, however, the risks are higher but the prospects for growth and return on investment are much greater, the research firm said.

The BMI commentary came on the heels of new reports revealing PLDT-owned Voyager Innovations’ intentions to raise up to US$150 million in fresh funds to strengthen its digital finance business.

Voyager Innovations is the operator of Maya, an integrated payment and digital banking platform.

Manuel V. Pangilinan, the chairman of PLDT, said on the sidelines of the company’s annual stockholders’ meeting in June that Voyager Innovations was looking to “raise some money, around US$100-150 million”, focusing on attracting new stockholders. He added that Voyager Innovations was currently negotiating with potential foreign investors to raise the funds, but noted that given the current market circumstances, PLDT and other existing stakeholders could likely be participating as well as.

Besides PLDT, existing investors in Maya include KKR and Co., Tencent, International Finance Corp. (IFC), IFC Emerging Asia Fund, IFC Financial Institutions Growth Fund, SIG Venture Capital, EDBI, and First Pacific.

Fitch’s BMI believes investors will likely welcome the initiative as it would cut back the parent firm’s debt, reduce their exposure to banking regulations and broaden the appeal of their fintech businesses.

“We believe that Asian investors with significant financial reserves will be keen to disperse their holdings across multiple growth business in order to hedge against rising inflation,” BMI said, noting that the Filipino fintech sector “is currently very attractive owing to its appeal to small businesses unable to secure funding from traditional investors.”

Voyager Innovations mulls Maya public listing

Maya, formerly known as PayMaya, is a Philippine financial services and digital payments company based in Metro Manila. The company was launched in 2000 as a digital payment business but expanded its spectrum in 2022 after being granted a digital banking license by the Bangko Sentral ng Pilipinas (BSP).

Maya Bank, which started operations last year, offers digital banking products and services, including savings accounts, payment cards, bill payments, remittances, consumer loans, cryptocurrency trading and micro-investments, among other products.

PLDT president and CEO Alfredo S. Panlilio said in June that a market listing for Maya was currently being considered, but noted that the current priority was to “improve the fundamentals of the bank first.”

“We are pushing very hard on deposits, loans, and loan books. They are coming out with micro-, small-, and medium-sized enterprise (MSMEs) offerings also, [and] some more offerings. But I think strengthening the bank first is the objective,” Pangilinan said.

Maya Bank has been growing its deposits in recent months, Pangilinan said, noting that, in April, that amount reached PHP 26 billion (US$477 million).

Maya boasted a total of 50 million registered users across its consumer platforms in August 2022, while its digital banking affiliate crossed the one million customer threshold in September 2022 or just five months after its launch.

BSP introduced the guidelines for its digital banking framework in February 2021 to encourage the growth and development of the industry. The move aimed to promote financial inclusion, enhance the efficiency of financial services, and foster innovation in the banking sector.

Despite significant improvement over the past couple of years, a large portion of Filipino adults still remain unbanked. The 2021 Financial Inclusion Survey (FIS), conducted by BSP, shows that account ownership stood at just 56% in 2021.

Under the Digital Payments Transformation Roadmap, the central bank aims to increase the number of Filipino adults with bank accounts to 70% and shift 50% of total retail transactions to electronic channels by the end of the year.