THE Philippine digital transformation is picking up steam, with substantial financial and telecommunication investments, Fitch Solutions unit BMI said.
“However, providing broadband connectivity to rural areas remains a challenge,” it said in a commentary on Thursday.
“Government initiatives are focused on addressing these gaps to improve financial inclusion and boost overall competitiveness in the digital economy.”
BMI said digital transformation efforts were fast-tracked following the approval of a $750-million World Bank loan for the Philippine Digital Infrastructure Project (PDIP) last week.
The project seeks to enhance e-government services, mobile payments, and digital infrastructure, adding to the ongoing investments outlined in the Philippine Development Plan (PDP) which aim to improve connectivity through fiber infrastructure investments.
“We expect the financial services sector to offer significant opportunities for fintech solutions as operators aim to expand their customer bases to include the unbanked population,” BMI said.
It said improving interoperability across mobile payment systems will drive development and increase access.
The share of online payments in the total volume of monthly retail transactions rose to 52.8% in 2023 from 42.1% in 2022, the Bangko Sentral ng Pilipinas reported.
This was ahead of the central bank’s target of digitalizing 50% of retail payments by volume by the end of 2023.
The BSP said the volume of quick response person-to-merchant transactions rose 2,713.9% to 58.6 million in 2023.
“Operators such as Globe Telecom have proactively diversified their services through mobile payment platforms like GCash, directly capitalizing on the rise of digital payments,” BMI said.
It noted that consumers are increasingly adopting “digital payments for everyday use, presenting opportunities for digital transformation.”
However, BMI noted that wireline infrastructure rollout costs are relatively high due to the geographic layout of the Philippines, leaving those residing in rural areas with limited broadband connectivity.
“The government’s initial PDIP loan focuses on bridging the gap in areas where fiber is not available due to perceived low potential returns on investment,” BMI said.
BMI said data usage and mobile penetration continue to increase, creating a surge in demand for innovative digital solutions and the expansion of mobile payment platforms.
It said favorable regulatory policies and public investments seek to address the unbanked population and enhance financial inclusion.
“We forecast the usage and value of e-commerce and ICT services in this market to grow, with Globe reporting a 14% annual increase in corporate data revenue, reaching P15.5 billion in the first nine months of 2024,” BMI said.
However, banks’ shift to digital platforms could expose them to cybersecurity threats, raising concerns about financial system stability, it said.
BMI also highlighted the need for micro, small and medium enterprises to adopt digitalization as “increased access to digital tools will boost their contribution to the economy.” — Aubrey Rose A. Inosante