Making digitalization work for the ordinary Filipino
The world is increasingly becoming digital. Many of our kababayans now buy and sell goods online. People take online classes, track their exercise regimen on FitBit, and use Facebook to keep in touch. More are choosing tablets over news print, and Viber over phone lines. The Digital 2022 report says Filipinos aged 16 to 64 spend an average of four hours daily on social media.
In advanced economies, such as Europe, cash is no longer a preferred medium of payment; merchants there prefer credit or debit cards. In Asia, countries like Singapore, Taiwan, Korea, Japan, Hong Kong and China are fast catching up with this trend. This makes me wonder, how ready is the ordinary Filipino for digitalization?
The changes are challenging enough; but the speed with which the digital revolution is transforming the way we live is dizzying. As the push towards a digital economy gets accelerated – especially amid the Covid-19 pandemic—some issues cannot be overlooked. Among them is the “digital divide,” the inequity in access to digital tools, such as the internet and digital-enabled services like electronic payments and online learning.
The pandemic had a silver lining, and that is the advent of the digital economy. The lockdowns forced people to explore e-commerce and digital payments, allowing more Filipinos to participate in the formal economy. It bolstered financial inclusion, a key policy reform espoused by the Bangko Sentral ng Pilipinas (BSP). It was both a boon and a challenge for microfinance institutions (MFIs), which had been advocating for the inclusion of all Filipinos in the financial system for decades.
The BSP’s financial inclusion advocacy is centered on enabling all Filipino adults to own an account that would allow them to send and receive funds, save and borrow money, obtain insurance, and other services. Working closely with stakeholders, BSP has mainstreamed microfinance into the banking sector, and pursued many laudable initiatives, which include, among others:
a) Branch Lite Units (BLUs) – Nowadays, people need not go to the cities to make digital payments and perform other transactions. BSP has allowed banks to expand by opening microbanking offices – eventually reclassified as BLUs – in places where the people are, instead of requiring them to come to the banks. BLUs help reach more clients at less operational cost, especially in far-flung areas.
b) Mobile banking through Cash Agents – Bank agents using mobile phones, tablets and other electronic hand-held terminals can now go to any location and, with no forms to fill out, transfer funds and accept mobile payments.
c) National Retail Payment System (NRPS) – We have seen the cost savings and efficiency gains in digital transactions at the height of the pandemic. The BSP’s flagship project to boost economic activities through an interoperable, safe and efficient real-time digital payments system is succeeding.
d) Expansion of financial touchpoints – ATM machines, digital cash machines, remittance channels and other initiatives have allowed more clients to be served, especially in the metropolis and suburban areas where BLUs and bank branches are available.
While much has been achieved, a number of issues surrounding digitalization hinder its benefits from trickling down to the poor in the countryside and hard-to-reach areas, including island towns.
MFIs are currently facing these difficulties with regard to digitalization:
a) Internet-related issues – problems related to the country’s internet infrastructure affect the delivery of financial services, especially in places with little or no connectivity. High internet costs also limit availment of services, both for MFIs and their clients. Technology is expensive. While many MFIs are partnering with fintechs to expand outreach, they are at the losing end in terms of profit-sharing, even if they do much of the grunt work.
b) The high cost of ICT systems and devices are racketing up the operational cost of MFIs. Knowing that their clients are poor with limited capacity to absorb additional expenses, digitalization is a real challenge for MFIs. The cost of cell phones and other gadgets also pose problems for their clients.
c) Skills and manpower requirements – finding qualified ICT professionals, and training staff on digital technologies is challenging. Brain drain, with staff leaving for better-paying opportunities offered by bigger companies here and abroad, have caused many MFIs to lose their people.
d) Digital literacy – the pandemic has forced people to engage digitally without the requisite training on ICT, internet safety, online fraud, fake news, and e-commerce. This underscores the need for digital literacy to be included in basic education curriculum. Also needed are digital literacy programs for adults, especially nanays and seniors now forced to navigate the unfamiliar system of online transactions. MFIs conduct digital literacy trainings, but it needs to be a collaborative effort with government and others in the private sector.
Financial inclusion would remain a pipe dream unless we address issues of internet connectivity, the high cost of devices, digital and financial literacy, and access to education of the poor and the marginalized.
Uneven patterns of digitalization could create a new class of poverty – the digital poor. The government and the private sector should work together to prevent this from happening.
Uneven patterns of digitalization could create a new class of poverty – the digital poor. The government and the private sector should work together to prevent this from happening.
“The biggest part of our digital transformation is changing the way we think.” — Simeon Preston
(Dr. Jaime Aristotle B. Alip is a poverty eradication advocate, He is the founder of the Center for Agriculture and Rural Development Mutually-Reinforcing Institutions (CARD MRI), a group of 23 organizations that provide social development services to eight million economically-disadvantaged Filipinos and insure more than 27 million nationwide.)