MANILA — Moody’s Investors Services’ report said the “penetration of mobile wallets in the Philippines has surpassed that of bank accounts, adding that the number of debit cards per 1,000 adults decreased 22 percent since 2015.” 

The report also noted that financial technology (fintech) companies continue to threaten local banks sluggish in developing digital services.  

“Slow development of digital services by Philippine banks weakens their growth prospects,” Moody’s said, noting that the country will continue to benefit from the growing working-age population’s favorable demographics, supportive operating environment for retail loan growth and social stability.  

“While the combination of these factors is similarly promising in the Philippines, banks in this country remain slow in developing digital services, leaving room for growing fintech companies to threaten banks’ position in key areas of the retail segment,” it added. 

Moody’s also warned that aging populations will make it hard for banks to grow and improve profitability despite factors mitigating the impact of demographic changes.  

“In the majority of emerging markets, banks will continue to benefit from the expansion of working-age populations. Yet the demographics of those countries pose their own risks for banks,” it said. 

In a report by The Philippine Star, the Bangko Sentral ng Pilipinas (BSP) under its Digital Payments Transformation Roadmap has pledged to convert 50 percent of total retail transactions to electronic channels and increase the number of Filipino adults with bank accounts to 70 percent by 2023. 

BSP Gov. Benjamin Diokno last August 19, announced the approval of the closure window for the establishment of digital banks and limiting the number of licenses to seven by the Monetary Board.  

“The moratorium allows the regulator to monitor the performance and impact of digital banks on the banking system and their contribution to the financial inclusion agenda,” according to the report.  

PH lead Asia Pacific in shift to e-wallet  

In another report by The Philippine Star, cybersecurity and anti-virus provider Kaspersky commissioned a study last October and found that the Philippines logged the highest percentage of new electronic-cash adopters in the Asia Pacific amid the COVID-19 pandemic. 

The country led the region in the e-wallet shift, with 37 percent of respondents saying they started using e-wallets during the pandemic.  

Kaspersky Asia Pacific managing director Chris Connell said that the study’s data showed cash is still king for now, with China having the lowest number of first-time online payment users with only five percent of respondents using the e-wallets followed both by South Korea and Malaysia at nine percent. 

“From these solid statistics, we can infer that the pandemic has triggered more people to dip their toes into the digital economy, which may fully dethrone cash use here in the next three to five years,” Connell said, citing mobile payments and mobile banking applications are also growing in popularity as 58 percent and 52 percent of respondents use the platforms at least once a week or up to more than once a day, respectively. 

Kaspersky also noted that safety and convenience triggered more users in the Asia Pacific region to embrace financial technologies, with nearly two in 10 respondents starting using the digital platforms after the pandemic. 

More regulation, taxes for fintech firms 

In another report by BusinessWorld, the Department of Finance (DOF) announced last November about the plan of government agencies including the Bureau of Internal Revenue (BIR) and the Securities and Exchange Commission (SEC) to tighten taxation and regulation of fintech companies following the surge in use during the pandemic.  

In a press brief, DOF said the BIR and the SEC will work together to assess how digital business models should be regulated and taxed.  

In a previous meeting, DOF Sec. Carlos Dominguez directed both BIR and SEC to “make sure they have enough regulatory and collection muscle for digital technology companies.” 

“Operating in the digital space is just a platform. The type of activity doesn’t matter. It’s still taxable by the BIR and subject to the appropriate regulations of the SEC,” Dominguez said. 

BIR Deputy Commissioner Marissa Cabreros, on the other hand, said their agency will create a team to evaluate companies’ tax obligations based on categories identified by the SEC and the BSP.  

“We would, however, like to ask the National Economic and Development Authority (NEDA) to update Philippine Standard Industry Classifications (PSIC), to ensure that emerging fintech activities or entities are properly classified as a type of financial service provider, and to also include all the other new industries in the digital economy,” Cabreros said. 

Dominguez also wanted the SEC to bolster its new PhilFintech Innovation Office, where these firms apply for registration, by hiring young employees with digital skills. 

In a Viber message, meanwhile, Paymaya founder and CEO Orlando Vea said they will support regulations that will enhance the fintech industry.  

“Fintech is a powerful tool for the country’s inclusive growth and it can only flourish in an atmosphere of trust and progressive governance,” Vea said in a statement. 

Fintech Chairman Angelito Villanueva, in another Viber message, said the organization “acknowledges regulators’ mandate in evaluating tax obligations and requirements.” 

“The Alliance is more than willing to collaborate with our regulators on drawing up specific measures to safeguard our end-users. This is the very purpose of the establishment of the SEC’s PhilFintech Innovation office which the Alliance actively supports. With better capacity building and synergy, fintech players are also empowered to implement better fraud management systems,” Villanueva said. 

“In the end, the least Alliance members can do is to protect consumers and clients, and to maintain the trust the public has invested in us,” he added.