Despite being a significant regional player in the fintech industry, several reports indicate that over 70% of Southeast Asia’s population is unbanked or underbanked. And the countries with the highest combined rates of unbanked and underbanked people are Vietnam (79%), the Philippines (78%), and Indonesia (77%), all of which are also the most populous in the region.

While we see significant trends in the booming usage of digital payments in the Philippines as a result of the government modernization initiative and the emergence of virtual banks, the majority still do not have access to basic financial services or face issues such as the inability to obtain credit cards, loans, or adequate insurance.

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Mocasa sees a great opportunity to improve financial inclusion in the SEA region, beginning with the Philippines as the country’s first credit payment app. We speak to Robin Wong, Chief Executive Officer of Mocasa, to better understand the landscape in The Philippines and how the local industry is evolving.

What about The Philippines made it a viable market for Mocasa?

As the Philippines’ Gross Domestic Product (GDP) continue to grow quickly these past years and the Bangko Sentral ng Pilipinas (BSP) aggressively pushes for digitalization and financial inclusion for Filipinos, the demand for cashless payment tools and low-cost credit lines is stronger than ever. However, the product offering is still not rich enough.

As the country with the second largest population and the fastest GDP growth in Southeast Asia, the Philippines’ penetration rate of credit cards among its working population is only 8.1% as of end-2021 according to World Bank and more than 80% of retail transactions are still paid with cash notes. With these, our team strongly believes that the said rates would be greater than 30% and less than 10% respectively after 5 years of development. This brings the best timing for Mocasa to be in the Philippines among all emerging countries.

Could you explain the current credit landscape in the Philippines?

Currently, we see a lot of credit and loan providers in the local market through online platforms and banks. However, most Filipinos can only get access to products with an annual percentage rate (APR) or interest of more than 120%, and only no more than 3% of them can get products from banks with affordable interest charges. Mocasa is the only fintech company that provides a 0-interest rate credit line and aims to serve the user base underserved by traditional big banks.

How large do you believe the credit landscape can grow in the market?

We strongly believe that the penetration rate of credit payments will increase to more than 20% in the next five years, which means over 20 million users of credit cards or credit card equivalents. The key to growing the local credit market is to improve credit facilities like the central credit bureau, unified ID system, and KYC for mobile numbers.

What are the major obstacles facing the industry in The Philippines from being able to scale?

There are two main obstacles: first is the lack of cashless payment tools, and second is insufficient credit data.

There are two main types of cashless payment tools in the world. First is the credit card or debit card (which is widely used in the US market), and the second is the e-wallet App (developed and greatly used in the Chinese market). Neither of these tools works in the Philippines. Our savings card penetration rate is about 50%, and the credit card penetration rate (among the Philippines’ working population) is only 8.1% as of end-2021 according to World Bank, which means that most Filipinos still do not have digital savings accounts and credit accounts. Although there are e-wallets like Gcash and Maya, they cannot be seamlessly linked to bank accounts and automatically debit money and must be “recharged” or topped up before they can be used, which is very inconvenient, resulting in e-wallets not being widely used for payment.

In terms of credit data, our credit bureaus are still in the early stages of development and can only cover a small number of people, and even the national ID has not yet been unified, resulting in disorganized credit data. Ultimately, without proper credit data, credit service providers have to raise interest rates in order to cover bad debt losses and consumers ultimately bear high interest.

What’s next for Mocasa in The Philippines?

Our focus is to invest heavily in further developing our unique app to address the cashless payment and credit data issues for Filipinos who are still not well-served by traditional banks. We aim to acquire more than 3 million credit accounts by the end of 2024 and plan to onboard more than 10 million users in 5 years.