FINANCIAL INSTITUTIONS in the Philippines should target the elderly and marginalized groups in expanding their customer base to boost inclusion, a report from the Asia-Pacific Economic Cooperation (APEC) showed.
Together with the Bangko Sentral ng Pilipinas (BSP) Research Academy, the APEC recommended measures to help financial institutions in the country navigate through the digital finance sphere.
The report tackled the APEC’s discussions with regulators, banks, financial technology (fintech) firms, and consumer groups during a webinar hosted by the BSP last year.
“One webinar speaker noted the tendency of financial service and product providers to focus their marketing efforts on easy targets — the millennials who are tech-savvy. As such, in a few years, this market may be over-served,” the report said.
Thus, authorities and financial institutions are encouraged to capture a different customer base, such as the elderly and the low-income groups, it said.
“Consider these segments not only during the marketing phase but starting on the conception or design phase of the product so that their specific needs and requirements would be addressed and appropriately incorporated into the features of the service or product,” it said.
Industry players and regulators should also connect with marginalized groups in order to cater to their specific needs and requirements.
“Dialogues are best continued throughout the lifecycle of the products and services. The feedback from these customers would help assess the usefulness, suitability and effectiveness of the services and products,” the report read.
“Moreover, a platform for complaints and their proper resolution could be established through the coordination of the public authorities with the service and product providers,” it said.
However, limited access to devices or smartphones could hinder digital finance penetration among marginalized groups.
“One device per family may constrain the use of digital financial services if the phone is with the husband, for example, and the wife needs to do certain transactions. This problem could be addressed with a program that would provide smartphones at low cost or with low-interest rate loans.”
According to the report, access to affordable financial services would help empower the vulnerable and underserved sectors that include women, youth, the financially underprivileged, rural communities, informal workers, migrant workers, and micro, small, and medium enterprises.
“However, with the development and further sophistication of fintech and digital finance, there is a growing concern about uneven access to the needed physical infrastructure or insufficient human capital. These can generate new sources of financial exclusion, especially among the same groups — women, the low income and the elderly,” it said.
Aside from focusing on the financially excluded, institutions should also be vigilant against rising risks amid the increase of digital financial services.
The APEC cited a study that identified 66 consumer risks grouped into fraud, data misuse, lack of transparency, and inadequate redress mechanisms, as well as agent issues and network downtime.
“Fraud, data misuse, network downtime and agent risks are directly linked to cyber security. Agent issues and network downtime both tend to impair the delivery of digital financial services to underserved and low-income consumers,” it said.
According to the report, the harmful effect of these risks is not limited to the loss of money of one user from a transaction, but also their tendency to erode the trust and confidence of the public in the financial system.
“The digital financial ecosystem thrives on trust. Therefore, it is the collective and shared responsibility of the public authorities, financial products and services providers and fintech firms to manage the risks by putting in place appropriate security in the technology and constant vigilance in the policies,” it said.
“Essentially, further progress in digital financial inclusion would require concerted actions from the various stakeholders—regulators, financial institutions, fintech firms and consumer groups — to reinforce the fundamentals,” it added.
The BSP wants 50% of retail transactions done digitally and to bring at least 70% of Filipino adults into the financial system by this year under its Digital Payments Transformation Roadmap.
The share of digital payments in the total volume of retail transactions in the country rose to 30.3% in 2021 from 20.1% in 2020.
Meanwhile, the value of payments done online represented 44.1% of total retail transactions in 2021, higher than the 26.8% share a year prior. — Keisha B. Ta-asan