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Startups in the Philippines are now entering their third generation, expanding on the foundation set by early ICT pioneers and visionaries in recent decades.
FREMONT, CA: The Philippines is entering its third generation of startups, expanding upon the foundation set by early tech pioneers and visionaries in the preceding two decades. In new research, a Filipino venture capital (VC) firm states that this new generation of companies will ultimately fuel the rise of the logistics, e-commerce, and fintech sectors.
As a result of expanding digitalization during COVID-19, finance activities increased. Filipino startups have raised a record $858 million this year in funding. This amount exceeds the total amount raised in the prior three years combined.
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Fintechs in the Philippines embrace the benefits of pandemic-driven digitalization: Alongside e-commerce and logistics, fintech has been a significant beneficiary of the massive shift to online channels caused by the pandemic, with telco-backed fintech businesses benefiting the most from the surge in financial demand.
Although companies dominate the Filipino digital financial market, new fintech startups continue to be founded regularly, with some garnering significant traction. For instance, the Philippine Digital Asset Exchange (PDAX), which finished a $12.5 million investment round in August 2021, claims that its user base has multiplied by 25, and its monthly transaction volume has increased by 80 since March 2020.
The number of fintech firms surged 7.3 times between 2016 and 2020, from 30 to 220, according to data from the central bank. During the prior 1.5 years, fintech startups represented 4.7 percent of all new businesses.
Government backing and investor optimism about the potential of fintech to promote the domestic financial inclusion drive will continue to fuel growth in the sector.
Even though financial inclusion has increased significantly in recent years, rising six percentage points, the proportion of unbanked in the Philippines remains high at 71 percent, representing a significant business opportunity for fintechs, according to the report.
Additionally, recent government initiatives, such as the rollout of the Philippine National ID System (PhilSys), which demands registrants to have bank accounts, and national efforts to increase financial inclusion, such as the Digital Payments Transformation Roadmap 2020-2023, which aims to increase the financially included to 70 percent of adult Filipinos, are laying the groundwork for greater adoption of fintech solutions.
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