How Mobile Financial Services Can Increase Financial Inclusion in the Philippines
The one third or 536 out of 1,530 of Philippine cities, towns, and villages still remain unbanked mostly due to the country’s archipelagic contours, preventing their population from being financially included.
Most of the financial institutions and, therefore, the best part of financial services, are concentrated in densely populated urban areas, while the rural settlements do not have a banking office. The Philippine economy has seen a sustainable upturn in a few recent years but the country’s economic growth experienced stagnation in 2019 due to the Asian financial crisis.
The state of the Philippines financial inclusion
According to Digital 2019 Philippines, over half of the adult population prefer keeping their savings at home and only 34% of the population have a formal bank account with access to financial services. The Philippines like to pay in cash as only 1.9% of them have a credit card, 4.5% – a mobile money account, and as little as 9.9% make online purchases and payments.
Worldwide FinTech (Financial Technology) movement is aimed at reaching maximum financial inclusion by transforming the traditional banking system into a digital one. Particular attention is drawn to a telecom-led financial inclusion. The reason for it is as clear as daylight – mobile penetration in the country is total and that provides direct access to all the prospective customers.
In this respect, the future is mobile financial technologies able to find the appropriate solutions to promote the financial inclusion of the nation.
The Philippine telecom and banking industry
The major market players are banks and telecoms. The leading companies in the country’s telecommunication industry are Smart (PLDT) and Globe (Globe Telecom). The key banking players include:
Six reasons why banks should collaborate with telecoms
As a rule, a bank maintains a relatively small market share within 10–15 percent as compared to telecom companies having about 30–40 percent. 2–3 mobile operators functioning in the market are likely to reach all the population.
Manual cash counting makes banking operations a lot more costly whereas cashless transactions are much cheaper providing the transparency and accountability of the financial services’ activity. Being always at your fingertips, mobile financial services are very convenient for banks, customers, and merchants to keep a closer eye on the flows of money.
The penetration of each individual bank is rather low due to the client acquisition problem. Being associated with complexity and sophistication, various banking products make it difficult to develop a simple and effective client acquisition scheme. Potential clients, as a rule, have little awareness of financial services and don’t understand whether they need them.
In contrast, telecom companies are very easy and efficient to cope with the issue of client acquisition as they have a simple low acquisition cost model taking advantage of customer’s ID verification and KYC approach. What’s more, a telecom’s product is clear and easy-to-read since the potential client is offered 2 or 3 basic tariffs and packages. Accordingly, a mobile provider knows pretty much about its clients due to tracking their geolocation, surfing the Internet and so on.
Unfortunately, not all banks are client-oriented, which is what prevents them from efficiently reaching the customer. First of all, financial institutions focus on managing active and passive transactions. Rather, telecom companies attach high priority to their customers monitoring ARPU every month. That’s why their main task is to increase ARPU and it is quite impossible to do without paying due attention to their customers.
As a result, mobile operator possesses a huge amount of data – their customer database – that banks desperately need to acquire as new clients. That is, in a nutshell, the mutually beneficial cooperation between financial institutions and telecom companies makes it possible to turn a telecom client into a bank customer.
How to ensure synergies between banks and telcos
Now the question is how to operationalize the collaboration between a financial institution and a telecom company. There must be a mediator between a bank and a mobile provider – the tool to coordinate the interaction between both. Among others, special attention should be devoted to a relatively new instrument – Wallet platform. With the name speaking for itself, Wallet platform is a tool enabling the promotion of mobile financial services.
It is a B2B, B2C, and P2P platform able to integrate financial institutions, telecom companies, merchants and their customers. Their collaboration is the synergy, based on a win-win relationship.
Wallet platform by Wallet Factory is created to solve two tasks:
▪ To provide a reliable and secure enterprise-grade eWallet platform
▪ To provide client’s business development with supervision and support.
Finally, it is appropriate to recall that promoting mobile financial services seems to be the only way to increase general financial inclusion in the country with the population over 100 million scattered about 7,000 islands.