The Disruptors: A Scan of Fintech Startups in the Philippines

The past few decades have been a turbulent time for banks the world over. From economic crises to political backlash to the emergence of new financial instruments, disruption is a surprisingly constant element in a sector that is otherwise known for being large, rigid, and resistant to change.

In the Philippines, where 10% of GDP comes from Filipinos abroad, the impact of technology has been most significant in international money transfers, where consumer behaviour has shifted massively from bank-to-bank transactions to smaller players like Xoom, Remitly, and Transferwise.

But this is only the tip of the iceberg. Just over the horizon, a surge of new technologies and technology-driven business models are poised to rip through the financial landscape with unprecedented magnitude. As always, the first step to preparing is to understand what’s coming up — and that process starts with understanding at the glimpses of the future taking place right here and right now.

Fintech (financial technology) startups are beginning to change the game of money by:

Bypassing costly infrastructure

In Ready or Not, AMIHAN chairman Winston Damarillo described the transformative potential of blockchain, a protocol that allows thousands of computers scattered across the world to authorize and process payments in a way that rivals a central bank database. Blockchain has vast applications in fields that range from health to food, but at the moment it’s best known for powering Bitcoin: a “currency without a bank” that allows people to exchange money with little to no transaction fees.

In the Philippines, has pioneered the use of Bitcoin and blockchain to pay bills, deposit money, ask for payment, and load up cellphone credits with fewer fees and less processing time than existing solutions., owned by fintech startup Satoshi Citadel Industries, aims to minimize international remittance fees through Bitcoin transactions.

Both ventures have tapped into the fundamental power of technology to drive down the costs of financial transactions. This principle applies beyond the scope of blockchain. First Circle, another Philippines-based startup, has automated and simplified the process of taking out business loans through an online application process, a user-friendly interface, and simple algorithms that are able to quickly analyze credit-worthiness.

Activating peer networks

Technology doesn’t just allow companies to offer more of their own services for less. The internet allows companies to offer things beyond their services, and financial institutions can prosper by acting not only as providers of financial services — but as platforms and online marketplaces for everyday people to provide financial services to each other.

Take the crowdfunding model, which allows people to seek early-stage funding not only from wealthy investors and VCs, but from hundreds of small pledges from family and friends. Popularized in the United States by Kickstarter and Indiegogo, the crowdfunding model made its mark on the Philippines through The Spark Project, which has helped creative Filipino projects get off the ground since 2013.

The platform model has allowed startups to offer financial services more efficiently than ever before. Take the traditional pawnshop, which allows people to access loans by taking appraised items as collateral and selling them in brick-and-mortar stores if the buyer defaults. The amount of the loan and the interest rate are based partially on the likelihood of selling the pawned item. By creating an online, peer-to-peer marketplace which is able to reach more people than a physical store, Philippines-based PawnHero is able to increase the likelihood of selling pawned goods and therefore give out more loans at cheaper interest rates. Also in the Philippines, Acudeen has taken this principle and applied it to the marketplace for selling unpaid invoices.

Knowing your customer

With lending in particular, one of the biggest barriers to entry is information: can you predict how likely your customers are to pay off their loans? Interest rates are calculated based on the risk of customers defaulting, and that risk is based on imperfect knowledge and proxies like credit scores and account balances.

How do you sharpen your knowledge of customers’ credit-worthiness, minimize losses, and lower costs? And in the Philippines, where an emerging middle class is looking to enter the lending market with little to no credit data, how do you begin to predict their behavior?

Lenddo was one of the first companies in the Philippines to fill in these gaps through non-traditional data — creating a “Lenddo score” for credit-worthiness and a “willingness to pay” based on information from phones and social media.

Recently, local startup Ayannah combined energy giant Meralco’s bill payment information with artificial intelligence (AI) technology to create credit profiles for the unbanked. This “Juan Credit” service is the latest in a line of products by Ayannah which harness technology to serve unbanked populations.

There, in Ayannah’s mission, lies perhaps the most important takeaway from this scan of fintech possibilities. It’s exciting that these disruptive ideas aren’t rocket science at the end of the day; these are models that incumbent banks can take and adapt to their own strengths and pain points. It’s even more exciting what that would mean for the country as a whole: a banking system that lives us to its true purpose of not only profiting off infrastructure, but by truly serving a nation’s people at the largest scale.

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