Fintech helping bridge financial inclusion gap

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Cashalo, the Filipino technology and financial services company helping build a more equitable future for Filipinos, is committed to support the Bangko Sentral ng Pilipinas (BSP) in its mission to provide more financial access and choice for underserved communities and micro, small and medium-sized enterprises (MSME).

Although the economy grew by 6.7 percent last year, among the fastest across the ASEAN, the country still ranked among the highest in income inequality. Furthermore, according to the BSP’s Financial Inclusion Survey 2017, over 77 percent of the Philippine adult population remains unbanked. This was an alarmingly high number that calls for an immediate evolution of existing financial systems to help bridge the gaps that remain a major roadblock to continued growth.

According to Hamilton Angluben, general manager of Cashalo, the fintech firm was founded on the principles of inclusion and innovation: We have a significant opportunity to not only transform the lives of millions of Filipinos, but to also deliver lasting, positive social impact through proprietary technology that helps unlock greater financial access, freedom and opportunity.

While financial inclusion does not automatically come with economic growth, there are clear and compelling socio-economic reasons to work toward a more financially inclusive future.

World Bank estimates indicate that the country’s local output could rise by more than 14 percent if the financial inclusion gap were closed. Cashalo sees this as a significant opportunity that we believe can be achieved through collaboration between the public and private sector, says Angluben.

Moving toward this goal necessitates a thorough understanding of where the opportunities lie and what can be done to effectively address them. Findings from the BSP’s survey indicate that the primary reasons include: lack of funds to open a bank account, not having the required documents, joblessness, limited access to affordable credit and low awareness.

Angluben is of the view: We firmly believe that a financially inclusive Filipino society can empower and transform the lives of the underbanked and underserved. The Philippines is primed to affectively address the challenges. In large part, because of the BSP’s forward-looking ‘sandbox’ approach to regulating the new wave of fintechs as well as highly proficient local talent pool that is eager to affect positive change.

BSP Governor Nestor Espenilla Jr. has emphasized that digital technologies and the mobile platform spark the emergence of a new competitive space where there is room to innovate, diversify and widen the reach of financial services that would better address the evolving needs of consumers while mitigating risk.

Cashalo’s mobile-app is designed to complement existing systems and bring greater benefits to more individuals and MSME by using next generation mobile and data technology. Cashalo has spent months to develop a proprietary infrastructure that analyses mobile, social and behavioral data, proprietary credit engine and risk models to develop an alternative credit assessment and financial identity for customers. To put into context, almost 90 percent of Filipino adults have no formal credit score and are considered financially underserved.

Companies like Cashalo are quickly becoming essential in all facets of financial services from payments to remittances to online lending and insurance. By using innovative technology, fintechs are able to bridge the gap left by existing systems and infrastructure that aren’t designed to cope with tens of millions of new customers, or the opportunity risk that comes with them. We look to empower millions of Filipinos with no credit history to build financial identities and allow them to participate in the global economy, says Angluben.

The role of the private sector cannot be understated. In the last 18 months, there has been an explosion in the number of technology companies operating in the finance sector. A 2017 industry report put the number of fintech startups in the country at 60. The transaction value of the fintech market in the Philippines is estimated to amount to $5.7 billion in 2018; with the number of startups expected to double. By 2022, the fintech sector in the country is projected to amount to $10.5 billion.

With the country’s huge untapped potential and a significant number of unbanked and underserved Filipinos, Cashalo states that digital consumer finance platforms tailored to meet the specific needs of average Filipinos and MSME, offers vast improvements in security, transparency and control, allowing millions of Filipinos access to the financial services they need with lesser requirements and lower fees.

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