British bank HSBC is backing up the potential growth of Fintech or financial technology companies in the Philippines as a supportive entity to the banking sector and should not be viewed as a threat at all, said its country officer.
HSBC Philippines President and CEO Jose Arnufo “Wick” Veloso said the local commercial banks and Fintechs “have a great deal to offer each other.”
“Banks have the trust of a large customer base, stable infrastructure, assets and regulatory know-how. Start-ups (or Fintech) can provide out-of- the-box thinking, technical expertise, and agility to adapt quickly to change. We expect greater collaboration in the future,” said Veloso.
Veloso said Fintech is not a threat to the local industry, that it will be more than a complementary entity to banks when it comes to improving access to financial services. “In as much as financial technology is putting pressure on banks, it is a lot further away from a disruption. The established banks are likely to remain key players.” He noted that retail banking in the Philippines have evolved in terms of regulation, technology, demographics and the “changing customer expectations.”
Veloso said he expects more collaboration between banks and Fintechs in the coming years. He does not view these start-ups as a “disruptive force” but rather banks’ new rival in the delivery of financial services.
“Fintech complements rather than threatens banking institutions. In my experience, banking has always been about technology, so today’s financial-technology innovation boom represents evolution rather than revolution for traditional banking. It is supplementing and diversifying the existing financial system – not replacing or disrupting it,” he remarked.
The Bangko Sentral ng Pilipinas (BSP) as early as 2015 has been keeping tabs on Fintech companies in the country, recognizing it as a game-changing tool in banking. However it is often viewed with caution by regulators because as a financial services provider, it relies solely on technology. Software-based businesses, accessible through the internet, are vulnerable to all kinds of threats on data secrurity.
HSBC in a statement said the ASEAN region’s internet economy will likely grow to as much as $200 billion by 2025 with about 480 million internet users by 2020.
Investments in the Fintech sector has increased to $9.6 billion as of end-July 2016 from just $103 million in 2010, according to data used by the bank.
“In the Philippines, the opportunities for partnerships between banks and Fintechs are being shaped by a growing middle class poised to increase take up of financial services and strong digital adoption across all demographic segments,” said Veloso. “There is also huge potential in helping access still a significant unbanked sector.”