Many Filipino adults consider having access to credit or being able to save money as beneficial to their everyday lives. In fact, given the chance, about 80% of those who never saved wouldwant to save money at formal financial institutions, and 32% of those who do not borrow money would want to borrow funds from these banks, according to one BSP study. Data shows, however, that only half of them have experienced transacting with banks.

The fact that conducting business with banks is a costly affair could be part of the problem. The average cost of a round-trip fare to reach the nearest access point is P43, a cost too high for a poor individual who is subsisting at below P59 a day. In emerging markets likethe Philippines, the challenge for financial inclusion has been the persistent inequality in accessto limited financial services and products.

Technology has the power to overcome some of these barriers in financial services, and has the potential to accelerate financial inclusion. Using data from African economies, the International Monetary Fund concluded that mobile penetration has driven the growth of financial inclusion in Africa, as evidenced by the positive and significant interaction between mobile penetration rate and number of deposits per head.

Our findings confirm a positive correlation between the financial access index for 2015 and areas with Internet Service Providers (ISPs) — in other words, financial access is greater in areas with wider ISP coverage. These findings imply that provinces with lesser access to formal financial institutions can possibly participate in the financial system through technology — which entails increasing mobile and internet penetration in poor, far-flung areas.

A thriving FinTech sector will play an important role in bringing tech-enabled solutions to the unbanked and underserved population in low-access provinces.

FinTech — or the use of technology to support financial services — is seen to bridge the banks, as well as the unbanked and underserved markets. Data from FINTQ shows that while access to formal financial services is heavily concentrated in Metro Manila, majority of borrowers who access digital lending platforms are coming from outside Metro Manila — an indication that digital is the way to go to reach the vast population of unbanked and underserved.

The physical barriers to access are crumbling down with the dramatic growth of both internet and mobile penetration. Mobile, in particular, is the essential inclusion-enabling technology, moving beyond being a delivery channel to becoming a service provider to the unbanked population in areas that lack the basic infrastructure. The socioeconomic barriers are breaking down too with the adoption of alternative credit scoring and other techniques that help the formerly financially excluded establish a credit footprint.

Indeed, the FinTech revolution is reshaping the world of finance in ways that ultimately benefit not just the banks and non-bank financial institutions, but, more importantly, the customers and the larger economy as well.

In other words, FinTechs are making things work for the better, as what previous studies have already shown. They serve the customers who may otherwise have been turned down by the banks — because they are becoming better at assessing credit risk through data. In the long run, FinTechs can help the unbanked and underserved establish their credit footprint, a critical requirement for accessing formal financial services.

They also cut the cost of financial services. Banks don’t need to invest much in putting up brick-and-mortar branches or deploying costly IT systems. Thus, customers pay lower interest rates because of lower administrative costs.

They also improve the quality of financial services. Customers can do transactions beyond banking hours and even outside bank branches.

In the Philippines, FinTech services such as those being offered by FINTQ enable rather than disrupt traditional banks in bringing efficient and affordable financial services to the unbanked and underserved through mobile money, digital lending, regulatory technology, insurance technology, digital payments, micro savings, micro investments, digital remittance, and other mobile-based technologies.