APPROACHING THE EVIDENCE

The mentioned points — geographical dispersion with the widely spread Internet and mobile communications and the insufficient living standards with lacking bank lending — stipulate a logical scenario for the further development of the national financial sector.

“The future of the financial system lies in going digital and using it to achieve financial inclusion. We are too fragmented geographically to reach out using traditional means.

Digital technology provides such a chance,” — this is how the Governor of the Central Bank of the Philippines Nestor A. Espenilla, Jr. sees the situation.

Considering the typical and inflexible traditional banking globally, it is not surprising that various alternative lending sources are rapidly growing in the country with a prevailing number of online services. They comprise microlending, which is the only “official” financial sector demonstrating a serious increase from 4.7% in 2015 to 7.6% in 2017, then peer-to-peer (p2p) lending with a steadily growing number of websites and volumes, and even initiatives in cryptocurrency. Undoubtedly, the development pace of the financial digitization will only strengthen over time, especially given the liberal state financial policy.

In our opinion, both the expansion of local start-ups and the appearance of experienced foreign fintech players having sufficient investment and technological potential are able to accelerate the process. The latter is important for the following reasons:

• Foreign capital provides

taxes, new jobs, and investment injections that decrease the load on the national economy and contribute to the rapid growth of its indicators.

• Business models have already

been tested, usually in more than one country, and optimized in terms of data security, operational efficiency and convenience for customers. They usually consider the pipeline processing of big data, the use of deep learning, artificial intelligence and other advanced technologies that are not fully accessible to new entrants on the market. This simultaneously helps the country to integrate adequately into the mainstream of global digital realities.

• Foreign investors allocating funds to the local market are mostly interested in a strategic long-term presence. Thus, the main principle of customer service is not to press out all resources but preserve long-lasting respectful relationships with borrowers. At the same time, the status of foreigners demands from companies to provide excellent services and preserve an established business reputation.

• The advantages of an international experience in fintech are effective, scalable and highquality scoring technologies. Operating on the international scale with a focus on the strategic presence is possible when serving a creditworthy audience. Otherwise, such a business model is not viable leading to wasted time and investments. This approach requires assessment of clients and provides an adequate debt burden of the population.

Thus, taking into account the national specifics, we think that fintech solutions (mainly remote ones) are able to unite the Filipino society in solving the issue of raising living standards in the immediate future. In this sense, inflation or the key interest rate increased by the Central Bank facilitates the expansion of alternative lending. The high degree of effective adaptation to global economic and technological processes that is inherent to the Philippines promotes this scenario. The rapid transformation of the country into a world leader by the number of outsourcing call centers is a bright example.

The main economic risk is the growth of the debt load on the population that should not be ignored. However, the expansion of fair competition on a market will contribute to the steady improvement of lending terms. The focus of experienced players on a financially reliable audience supported with initiatives designed to improve the financial literacy of the population can minimize the risk.

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