Fintech Alliance.PH, in cooperation with Enderun Conferences, recently hosted the second edition of Inclusion and Digital Transformation (INDX) Summit last Nov. 22-23, 2022 at the Enderun Tent in McKinley Hill, Taguig City. The event was attended by hundreds of industry practitioners involved in finance and technology locally and internationally, and was participated by some of the country’s highly-esteemed regulators, government officials, economic policy makers, thought leaders, and members of the diplomatic corps.
The goal of the INDX Summit 2.0 was to discuss challenges concerning the digital divide between standards and regulations in e-commerce, health, agriculture, education, MSMEs, open banking, insurance, AI, and the new technologies, among others. It also discussed how Filipino consumers and businesses can use digital technology and digital transformation to deal with the current environment, advance economic recovery, and get back on track in achieving long-term financial goals.
“This monumental event is the gathering of the Philippines’ visionaries and trailblazers. The past two years have been golden for the fintech industry in the Philippines and throughout Southeast Asia. It is only fitting that we reflect on our successes and welcome promising years to come,” said Lito Villanueva, founding chairman of the FinTech Alliance.PH and the executive vice-president and chief innovation and inclusion officer of RCBC.
Statistical Review
According to the Philippine Statistics Authority, the value of the digital economy in the Philippines increased by 7.8% and reached P1.87 trillion in 2021. E-commerce erupted through the pandemic and continued to grow post-lockdown. Online selling transformed from being a side job to becoming a primary source of income. The main drivers of the digital economy, which contributed to 9.6% of the nation’s GDP of the same year, includes digital infrastructure, e-commerce, and digital content.
Figure 1. Gross Value Added (GVA) and Percent Share of Digital Economy to GDP at Current Prices, 2018-2021 — Source: Philippine Statistics Authority
In addition, the ASEAN digital economy has expanded more quickly as a result of the digital boom. According to Google, Temasek Holdings Pte., and Bain & Co., it is anticipated that the internet space will receive US$200 billion and a total value of transactions this year, exceeding the projected target three years earlier than anticipated. However, given these outstanding outcomes, it’s important to keep an eye out for early indications of concerns. As a result, fewer people are using the internet from 10% in the preceding year to only 4% in 2022.
There are also numerous challenges and societal deficits associated with the digital divide. One example is the lack of proper infrastructure. Affordability is also a challenge, owing to a lack of competition and investment. There is also the issue of intimidation, the presence of loan sharks, and a lack of trust in the system, which has prevented businesses from fully embracing a more digitized economy.
The Philippine Economic and Digital Roadmap
From looking at the macro point-of-view, the Bangko Sentral ng Pilipinas (BSP) specifically observed significant progress towards achieving its targets under the Digital Payments Transformation Roadmap 2023 where moving out of cash results in greater efficiency. BSP Governor Felipe M. Medalla stated that “in order to digitize more peer-to-business and business-to-business payments, the BSP collaborates with the payments industry to launch new innovative payment streams.” These are anchored into three pillars such as digital payment streams, digital finance infrastructure, and digital governance and standards. The goal is to make 50% of total retail volume become digital and 70% of Filipino adults become financially included. “To go digital, you will become more efficient. It’s going to be beautiful in the coming years,” he added.
For Finance Secretary Benjamin E. Diokno, “The COVID-19 pandemic has redefined what we considered to be ‘business as usual’ [and] it also presented an opportunity for economists around the world to quicken the pace towards a more digital economy. Although there are strides to adapt to the new normal, there is still much to be done before it is able to reach the goals.”
It is critical to expertly navigate through the pressing global challenges posed by the volatile political landscape. To address these issues, the government developed a set of strategic interventions known as the 8-Point Socioeconomic Agenda. “We will address the impact of inflation and the vulnerable sectors, reduce economic scarring from the pandemic, and ensure some macroeconomic fundamentals,” Mr. Diokno explained.
Philippines Through Digital Transformation and Inclusion
Both the government and the private sector should build a rapport in leading the digital transformation in the country. Leaving it solely to the government wouldn’t be economically feasible. GCash President & CEO Martha Sazon justified that “Digitalization or digital economy is a very complicated value chain. It starts from internet connectivity, device availability, and the various regulators around it, and into our space — fintech, e-commerce, and the various economic services. In the complete value chain, you have the government in each and every step. But you have different private sectors participating in it. While we may provide advanced technology, best practices from our partners and execution, we need the partnership from the government to make it easy for us to participate and to increase the penetration.”
Indeed, as the Philippines transitions to a new digital economy, the government highly supports the fintech industry and is moving in a positive direction by imposing standards and regulations. During the speech of Senator Mark A. Villar in the INDX Summit, he stated that “[although] the pandemic has revealed and brought urgency to necessary reforms in public health, social safety nets, disaster response, and rural development, among others, what reinforces all these reforms is the digital imperative. Going digital is the way and the key.”
Mr. Villar, who also acts as the chairman of the Senate Committee on Banks, Financial Institutions and Currencies, has filed Senate Bill No. 1128 or An Act Promoting the Adoption of Digital Payments for Financial Transactions of the Government and All Merchants, and Resolution No. 126 directing the appropriate Senate committee to conduct an inquiry in aid of legislation on the status of regulations by the Banko Sentral ng Pilipinas and other relevant government agencies concerning cryptocurrencies and other digital currencies in the Philippines.
“We are ready to support further innovations for the more efficient, convenient, and secured use of digital assets, as well as to legislate to ensure that digital transactions are duly protected. Our hopes for a more equitable and successful post-COVID society involve the establishment of crucial digital economy pillars such as robust digital infrastructure, digital skills, e-government, e-commerce, and an enabling legislative and regulatory environment,” said Mr. Villar.
Conclusion
The INDX Summit 2.0 was capped by the Fintech Alliance Ambassador’s Gala, which brought together key heads of missions and other international development agencies as well as regional and global partners. Albay Second District Rep. Joey Salceda, who is also the committee chair for Ways and Mean, culminated the event with a keynote speech where he addressed how “Technology has always been at the heart of finance.”
As the first champion in Congress of the Virtual Banking Act, the Fair and Inclusive Credit Act, the Financial Technology Development Act, the Blockchain Technology Development Act, as well as the parametric insurance for government assets which equalizes risk among LGUs, among others, Mr. Salceda explained, “Digital financial technology must be trustworthy. With more digitalization of finance comes the digitalization of the most predatory practices in the sector, and its underground mutations. Technology can do so much, but its aim must be to create value and virtue in society. The Philippines abounds in problems that the fintech sector can solve. If anything, that makes it a promising market for you.”
Even though the Philippines is lagging behind many of its regional neighbors in terms of digital implementation, there is hope in the adoption, and fintech turns all of these problems into the silver lining. Every Filipino has a fair share of the technology that is currently available, which has the positive effect of empowering everyone digitally by providing access to everything they need for their finances as well as the data they require to expand sustainably. Furthermore, financial literacy is essential when utilizing digital technology. Everyone can benefit from it by learning and understanding its ethics, discipline, and standards.
A number of pioneering initiatives have also been launched during the first FinTech Alliance Ambassadors Gala. These include the first off-campus Fintech and Regulatory Innovations Technology Program in the ASEAN region by the Cambridge Centre for Alternative Finance by the Judge Business School of the University of Cambridge in the United Kingdom in partnership with the Mapua University and the FinTech Alliance; the launching of the BSP Governor Nestor A. Espenilla, Jr. FinTech and Inclusive Finance Grants Matching Program; and the collaboration with the Ant Group’s 10 x 1000 Tech for Inclusion. The event also saw the oath taking of additional members of the Board of Trustees as well as incoming new members.
The INDX Summit is a flagship event of Fintech Alliance.PH and has been running since 2019. It is an excellent learning and networking platform for professionals and stakeholders striving for sustainable digital transformation success.
The INDX Summit 2.0 — Accelerating the Digital Economy: Issues, Impacts, and Innovations was co-presented by Binance Academy and was made possible by the following sponsors: RCBC, Maya, Pru Life UK, InvestHK, Brankas, Grover, Clari5, M2P, Uniphore, Saviynt, CYFIRMA, Ion Management Solutions, Netcore Cloud, Pera Hub, Coins.ph, GSIS, CIBI, UNO Digital Bank, Tala, and ANT Group; government partners: Department of Finance, Banko Sentral ng Pilipinas, Department of Information and Communications Technology, Securities & Exchange Commission, Insurance Commission, Department of Trade & Industry, Credit Information Corp., and National Privacy Commission; and industry organization partners: JCI Manila, Management Association of the Philippines, Women’s Business Council, FINEX, Institute of Corporate Directors, Global Impact FinTech, Mapúa University, 10×1000 Tech for Inclusion, ANT Group, and the University of Cambridge Center for Alternative Finance.
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