Wednesday, November 29, 2023

Fintech Integration in the Philippines


Fintech Integration in the Philippines

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2020 was a year where traditional commerce and fiat was heavily disrupted due to the domino effect of the pandemic.

In the months during and following the lockdowns, Filipinos were able to brush up with fintech and online transactions due to the scaled back operations of businesses large and small, as well as the social restrictions in place on travel, mobility and the consumer experience when it comes to the purchase of goods.

Despite the pandemic, fintech was a strong performer in the Philippine economy as mobile wallets, online shopping and e-payments had a banner year when it comes to their take up, transactions and rapid expansion on new partnerships and territories.

Indicators of 2020 being the year of fintechs are:

• Globe Telecom’s G-Cash mobile and digital wallet, saw a 700% increase on uptake and spending.

• Digital banking adoption and usage accelerated during the lockdown and quarantine periods as Filipinos were using banking apps and online banking

• Cross-platform payments posted impressive growth: InstaPay registered a growth rate of 820 percent in volume from 3.2 million to 29.0 million transactions while PESONet transactions more than doubled, with the volume surging from 1.1 million to about 2.7 million, i.e., by 143 percent year-on-year.

• Filipino online gaming and spending hits record-high during the pandemic months

• According to a publication by KPMG, 64% of Filipino internet users are spending more time on social media, with 23% indicating an increased activity in their online shopping activity.

• The iPrice Group revealed that Filipinos the total sessions or visits to shopping applications in the country climbed to approximately 4.9 billion during the lockdown period.

• According to Inquirer that cited Trade Secretary Ramon Lopez: Mr Lopez reported that 73,276 new online businesses had been registered since the pandemic began, a staggering 4180-percent increase from the 1,753 existing online businesses prior to March.

The Benefit of Fintech to Businesses

Essentially, the benefit of businesses embracing and evolving with fintech is basing on moving with the times where consumers are opting for a more online-first experience when it comes to payments, shopping and transactions.

The fintech structure allows businesses to offer a self- checkout mechanism for consumers as opposed to being guided by a sales person found in traditional retail.

Fintech also allows businesses to process, handle and account for money via payments in a much more seamless way as accounting platforms are being integrated further into the retail / payment side of the business transactions.

This entails savings from the cost of being reliant on traditional over the counter purchases and its due paperwork when it comes to receipt handling, invoice handling and interval reconciliations within bookkeeping.

With fintech, the cycle of purchase, receipt, sales control and bookkeeping has become more seamless as specialized software and Application Programming Interface (API) are communicating with one another and securely passing data with one another during the purchase cycles.

With the same broad set up with fintech, it is easier to track purchases made online across numerous branches as opposed to the traditional set up of consolidating all end of week sales across all branches in a given geography.

The latter is a traditional and an essential but time-consuming task in running the business, but with fintech, everything is tracked, compiled and managed by financial control in real time.

Moving with the Times with Fintech

Consumers prior to the pandemic allotted a day or a specific time to pay their utilities.

The process involved commuting, lining up with a payment center of a utility provider payment desk – which is often the case with multiple utility providers ie electrical, water, cable, internet, etc.

The process can take as long as half a day – depending on the queue line. With fintech, consumers pay online through the avenue of online banking, digital wallet or cross payment portals – all of which can be accomplished in a matter of minutes.

The latter is a modern and convenient way to pay for utilities and the previous one is currently discouraged due to the fluctuation of the pandemic.

With the pandemic, consumer mind sets and behaviours are changing as more and more of them are choosing to pay online first, rather than travel and queue up for payment.

With fintech, there is value creation within the proposition of two essential avenues of business:

Business side value creation – a more seamless and cost-effective way to handle payments compared to traditional over the counter transactions.

Customer side value creation – Time saved from commuting or driving to queue up, allows customers to be more productive with their time.

As banks, financial institutions and businesses are all experiencing transformation by allowing fintech’s new forms of payments, other businesses must also rethink how they can service payments and transactions as consumers are evolving with the time and the technology at hand.

Fintech Integration Models

When it comes to the integration models of fintech in terms of whether inserting such platforms into an existing business process or rebuilding the process from the groundup, there are cost- efficient processes in order for businesses to quickly migrate into the fintech scene.

The first is the quickest through API integration. API platforms such as payment processor allows existing businesses with online signups or e-commerce sites to sign up and use their respective platforms as a way to allow customers to pay online.

The second is through a Payment Solutions as a Platform model where such providers offer an end to end solution that allows customers to sign up, enrol with their credit or debit facility and make payments on websites through these platforms.

The third is Fintech Solutions Engineering where the financial handling and transaction process is mapped and migrated from manual to a software interface.

This allows businesses to migrate from over the counter transactions to an online and secure form of payment and self-checkouts for customers.

This utilize a combination of API, Payment Solutions software, an Enterprise Resource Planning (ERP) software and an Accounting / Bookkeeping platform that tracks, records and consolidates transaction.

The end model of the project is make financial and transaction handling seamless when it comes to interfaces with software and making financial management more cost-efficient.

As banks and financial institutions are undergoing more digital transformation in order to keep pace with the mobility and efficiency of mobile applications as consumers are increasingly preferring digital banking and online banking compared to over the counter banking transactions, it has a wide cascading effect where payment solutions, payment portals and digital purchase markets are also finding new ways to allow customers to utilize online payments for efficient transactions.

Businesses must scale with the emerging digital infrastructure future of commerce and finance while also keeping pace with the evolving transaction preference of consumers.

Fintech and its wide-range of applications from online payments, streamlined financial control and credit related services are here to stay and businesses must not miss out on this budding transformation.

Among the meaningful ways to regain the vigor and momentum on the business- side is to keep pace with technology in order to connect with consumers and be able to offer better value services.

DynaQuest is an award-winning Blockchain solutions provider and among its services includes a platform for fintech transformation to businesses who are looking to transform how they handle finance and payments.

The company also provides secured payment integration and cross payment integration solution for businesses who are looking to take their products online.