The fintech industry is reshaping the financial landscape in 2024, driving innovation and fostering financial inclusion in unprecedented ways. With its burgeoning digital economy, the Philippines has emerged as a key player in this global movement.
From the surge of digital banking to groundbreaking advancements in stablecoins and anti-fraud measures, the fintech sector is tackling long-standing challenges while creating new opportunities. Let’s explore the top stories shaping the fintech ecosystem in the Philippines in this eventful 2024.
Digital Banking: A Revolution in Deposits and Challenges Ahead
To kick things off on the top fintech stories in 2024 within the Philippines, we can see an undergoing transformation in digital banking. By mid-2024, the nation’s six digital banks collectively amassed over PHP 80 billion in deposits, reflecting a remarkable 32.26% annual growth rate.
This impressive growth demonstrates the sector’s ability to reach underserved markets often overlooked by traditional banks. With a depositor base now encompassing 8.7 million accounts, digital banks are redefining financial access for millions.
However, profitability remains a significant hurdle. As of this year, only two of the six digital banks have managed to achieve profitability. High rates of non-performing loans—14.49% compared to the broader banking sector’s 3.24%—present a major challenge.
Such disparities underline the need for innovative credit management strategies and stronger risk mitigation frameworks. As the Bangko Sentral ng Pilipinas (BSP) prepares to welcome four new digital banks by 2025, competition will demand unique value propositions and groundbreaking business models from new entrants.
Digital Payments Are Exceeding Expectations
A significant milestone was achieved when the Philippines surpassed its target of 50% digital payment transactions. By 2023, 52.8% of all retail payment transactions were conducted digitally, up from 42.1% in 2022.
It highlights the success of BSP’s Digital Payments Transformation Roadmap and the growing adoption of e-money accounts among Filipinos. Beyond convenience, digital payments fuel economic growth by enabling faster remittances, streamlining business operations, and empowering small enterprises to join the digital economy.
The shift toward a cash-lite society reflects the collaborative efforts of the BSP, businesses, and consumers to build an inclusive financial ecosystem. Sustaining this momentum will require continuous improvements in security and efficiency.
Wholesale CBDC Changing Interbank Transfers
A pivotal development in the Philippines’ fintech journey is the BSP’s Project Agila, a wholesale Central Bank Digital Currency (CBDC). This initiative allows 24/7 interbank transfers, even on holidays. Project Agila leverages distributed ledger technology to enhance liquidity management and minimise settlement risks.
Having successfully undergone testing with financial institutions, the project promises to enhance the efficiency and resilience of the national payment system.
This is largely due to the wholesale CBDCs. It represents a forward-thinking approach to large-value payment systems, with potential applications in cross-border payments and securities transactions that could transform financial operations.
Combating Financial Cybercrime with AFASA
The Anti-Financial Account Scamming Act (AFASA), enacted in 2024, is another significant step in addressing financial cybercrimes. AFASA targets activities like money mule operations and social engineering scams, imposing penalties to deter these financial crimes. This Act empowers the BSP to investigate violations and fosters increased cooperation between government agencies and financial institutions.
This legislation exemplifies a proactive effort to protect consumers and uphold the integrity of the financial system. Emphasising robust risk management systems within financial institutions further reinforces public trust and confidence in digital financial services.
Pioneering Stablecoins for Financial Inclusion
The introduction of PHPX, the Philippines’ first bank-backed stablecoin, marks a major advancement in financial innovation. Developed by leading financial institutions in partnership with Web 3.0 firm JUST Finance, PHPX aims to enhance financial efficiency by lowering remittance costs and enabling seamless cross-border transactions.
Coins.ph also launched PHPC, a peso-pegged stablecoin on the Ronin blockchain, catering to the thriving Web 3.0 gaming community. These projects demonstrate the Philippines’ leadership in blockchain technology and their potential to drive financial inclusion through accessible and cost-effective digital financial tools.
Promoting Digital Wage Payments
In a nation where 70% of private-sector salaries are still paid in cash, the transition to digital wage payments represents a crucial step toward financial inclusion.
Led by the BSP and the Department of Labour and Employment (DOLE), this initiative seeks to provide workers with faster, more secure access to their earnings while promoting financial stability through savings and insurance products.
For employers, digital wage payments improve productivity, enhance accuracy, and increase safety. Shifting from cash to digital methods allows businesses to formalise operations and unlock new financial opportunities. These efforts underscore the transformative potential of digital wage systems for workers and employers alike.
A Vision for the Future
As the fintech sector advances, the country is proving to be a trailblazer in innovation and financial inclusion. The top fintech stories of 2024 within the Philippines illustrate a dynamic and resilient ecosystem.
Nevertheless, challenges remain. Ensuring sustainable growth in digital banking, mitigating cybersecurity risks, and achieving equitable access to digital financial tools will require ongoing innovation and collaboration.
Hence, policymakers, financial institutions, and technology providers must work together to create an environment of trust, inclusivity, and resilience.
Fintech’s transformative potential lies in its ability to bridge gaps and create opportunities for everyone. By embracing this potential, the Philippines can set a global standard for leveraging technology to build a more equitable financial future.
Featured image credit: Edited from Freepik
