MISAMIS ORIENTAL — As local governments push for technological innovation to drive economic progress, a new study highlights both the rapid shift toward digital services in the country and the barriers that still prevent millions of Filipinos from fully participating in the formal economy.

In Northern Mindanao, Iligan City is actively moving to harness artificial intelligence (AI) to help local enterprises grow, upskill workers, and create more livelihood opportunities. At the same time, a Philippine Institute for Development Studies (PIDS) report shows that while digital financial services are expanding, more than half of Filipinos remain unbanked — underscoring gaps in infrastructure, policy, and access.

AI push in Iligan

The Center for Digital Iligan Innovation and Sustainability (CDIIS) is leading the city’s push to promote the ethical and practical use of AI, framing it as a core skill for employment and business competitiveness.

During a Digital Creatives Talk at the Digital Creatives Hub, government, education, and private sector stakeholders discussed how technology can improve business operations and public services.

“It’s not about being computer literate; it’s about being AI literate to get hired and to get jobs. It’s upskilling the local workforce of Iligan, MSMEs, government workers, and services, especially with AI as a tool,” said Paul Hui Lagura, CDIIS head and innovation governance consultant.

The initiative aligns with Mayor Frederick Siao’s push to prioritize job creation and entrepreneurship while integrating local culture and heritage into development programs.

City administrator Darwin J. Manubag said accessible technology can help level the playing field for small businesses. “If you’re a small business, it’s easy for you to make sure that your products will be marketable and visible on social media,” he said, noting that adapting to digital tools is now essential.

Jaime Noel Santos, president and co-founder of Thames International School, said AI should complement human work rather than replace it.

“Mas importante na ngayon ang human relationship, because AI has no feelings. Empathy is more important now,” he said.

He added that maximizing AI requires stronger collaboration between government, industry and academe.

Digital finance grows, but gaps remain

At the national level, the PIDS study titled “Digital Financial Platform Engagement and Financial Inclusion in the Philippines: Insights on AI Deployment and Policy Implications” found that account ownership rose from 29 percent in 2019 to 56 percent in 2021. Digital payments now account for 57.4 percent of retail transactions.

Users of e-wallets and digital banking are more likely to have formal financial accounts, showing that digital tools are driving inclusion.

However, more than half of Filipinos remain outside the formal financial system. Key barriers include lack of money, high transaction costs, limited documentation and low trust in institutions.

The study also noted AI’s growing role in financial services, including fraud detection, credit scoring and customer support. But adoption is uneven, with large institutions leading while smaller cooperatives lag due to limited resources.

Researchers warned that data privacy risks, cybersecurity threats, and fraud concerns could slow adoption if not addressed.

They recommended stronger digital infrastructure, expanded literacy programs and clearer regulations on AI use.

“By strengthening digital infrastructure, promoting financial and digital literacy, and ensuring responsible AI adoption, the Philippines can transform digital financial platforms into a true catalyst for inclusive and sustainable growth,” the study said.

Together, the developments reflect a broader goal: using technology to expand opportunity, improve services and make economic growth more inclusive.