Intense competition seen in fintech

MANILA, Philippines — Major players in the financial technology (fintech) space in Southeast Asia, including the Philippines, are facing intense competition and even possible consolidation amid the COVID-19 pandemic, according to Fitch Ratings.

In a report, the debt watcher said fintech companies in the region are likely to sharpen their focus on profitability as the industry gains scale.

Fitch noted a rapid rise in fintech adoption amid broadening internet connectivity, spurred by the social distancing measures to contain the pandemic.

“Southeast Asia’s fintech industry is gaining momentum as the region’s digital transformation gathers pace. Several frontrunners have emerged, but the sector is still in its infancy, with substantial room for growth,” Fitch said.

It also said competition is likely to remain intense as companies vie for market share, while regulation is liable to tighten upon greater sector scale and systemic importance.

“Large financial-sector incumbents will remain formidable competitors, with the resources to outspend new entrants in technology investment. Sector competition is likely to remain intense, and we expect economies of scale and tighter regulation to drive industry consolidation in the medium term,” Fitch said.

The international credit rating  agency said that more than half of the more than 580 million population in the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam were unbanked as of end-2020, providing market potential for fintech companies in the region.

“Southeast Asia’s favorable demographics and low financial penetration make it an attractive target for fintech aspirants. This presents a large pool of consumers who will underpin demand for financial services as incomes rise over the next decade,” Fitch said.

Consumer-facing fintech applications in the region include payment and remittance services, lending and crowdfunding platforms, insurance distribution, end-to-end servicing, as well as wealth, investment and advisory services.

It noted that Globe Telecom’s e-wallet giant GCash in the Philippines reported a 65 percent jump in registered users in 2020 as the COVID-19 pandemic served as a catalyst to digitalization.

The Visa Consumer Payment Attitudes Study 2021 showed that 75 to 80 percent of consumers in the Philippines, Indonesia, Thailand, and Vietnam have an interest in using a digital bank.

The Bangko Sentral ng Pilipinas (BSP) has issued a three-year moratorium on the grant of licenses to new digital banks after it decided to limit the number of players to five. It granted licenses to Overseas Filipino (OF) Bank of state-run Land Bank of the Philippines, Tonik Digital Bank, UNObank, Union Digital Bank of Aboitiz-led Union Bank of the Philippines, as well as GOtyme – a joint venture between the Gokongwei Group and Singapore-based digital bank Tyme.

The regulator is still evaluating the applications of two entities, including that of PayMaya’s Voyager Innovations.

“We expect regional regulators to remain supportive of e-payment technology,” Fitch said.