Philippines: Ripe for hypergrowth and hyperprotection
24 May 2022
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Author: Michael Calma, Country Manager, Philippines, ADVANCE.AI


About the author


As the Country Manager of ADVANCE.AI in the Philippines, Michael Calma sees it as his mission to accelerate financial inclusion in the Philippines by helping sectors including banking, financial services, fintech, payment, retail, and e-commerce, using big data and AI to solve digital transformation, fraud prevention, and process automation. Mike is a strategic leader who believes in the power of inclusive and accessible technology – his penchant for overcoming business challenges started when he co-founded two tech start-ups fresh out of college, and developed when he served in the management teams of NEC, MDI, NTT Ltd., and DDLS Aboitiz. His commitment to Philippines' high-growth organisations stems from a common passion: to offer end consumers more inclusive, safer, frictionless experiences through products and services these companies provide.


The time is ripe for digital disruption and financial inclusion for the Philippines. Our population is at about 112 million now, half of it is unbanked – mobile penetration is at a relatively high 75% according to – in fact, some users own multiple devices. What's interesting is also a significant portion of under-30s. These young people are digital natives who are spending some 11 hours online every day with more than half that time on social media. When you have all these elements coming together, you can see that the Philippines is in a favorable position for digitalised financial services, for conversations around Web3 and so forth. Let me share a little more.


Accelerating financial inclusion and providing the infrastructure for Filipino companies were some of the topics covered in the recent presidential election, and for good reason. The business focus of Philippines had been largely in the service industry, whether in tourism, exporting our services overseas with workers ranging from blue collar to white collar, or in terms of outsourcing for call centres and software development, etc. But things are starting to change very quickly. Metamask, a popular Web3 wallet, attributes 20% of their userbase in the Philippines – that sounds like a promising number, driven for the most part by the popularity of NFT-based games including Axie Infinity, which allows players to earn cryptocurrency.

"There will be an increase in the number of unicorn
and soonicorn companies in the Philippines."

There are two phenomena many are discussing.

One, there will be an increase in the number of unicorn and soonicorn companies in the Philippines. There has been a lot of infusion in terms of capital and we have seen bigger companies like GCash and Maya cross that unicorn threshold – many homegrown brands, including neobanks and fintechs, are also following that path.

Two, fast-tracked innovation. New companies and new industries are injecting fresh innovation in the banking and financial sectors. The established banks are looking at the opportunities through a fresh lens too. Even though comparatively they may have a larger capital backing, they also understand the need to innovate and the importance of new technology. For example, ADVANCE.AI is working with some of the top banks in the Philippines on expanding their digital footprint through different channels: mobile, web, or even through agents. Although the bigger banks have been slower to adapt to the digital habits of consumers, they still have the lion's share of the market but that is quickly changing with competition from neobanks and the fintechs. 

"ADVANCE.AI can help enable frictionless customer journeys for banks,
fintechs and hypergrowth companies starting from onboarding."


The regulatory bodies in the Philippines are also supporting the hypergrowth environment. We are seeing favorable policies to supercharge growth including adopting a sandbox approach to foster innovation and public/private sector collaboration from BSP (Bangko Sentral ng Philipinas) and other agencies. These include the National Privacy Commission, the Securities and Exchange Commission and Department of Trade and Industry – encouraging innovation while ensuring consumers are well-protected. Linkages with regulators of other countries also accelerate the adoption of cross-border best practices. For example, the BSP and the MAS (Monetary Authority of Singapore) signed an enhanced FinTech Cooperation Agreement to facilitate interoperable payments between the Philippines and Singapore.


Incubated in the Philippines to scale globally


Philippines' growth is often said to follow that of Indonesia's in terms of unicorns, but the Philippines' propensity is on going global, and I think it takes its cue from our business process outsourcing practice that has been developed and matured in the past decades.


So while the incubation is in the Philippines, many companies think of how they can scale, how they can expand to global markets. One recent example is YGG (Yield Guild Games) which partnered with Axie Infinity among other blockchain play-to-earn games to acquire NFT assets to loan out to managers and scholars on a revenue sharing basis. Managers and scholars are concepts unique to the decentralized play to earn industry (GameFi) where players can borrow higher level game assets in order to progress in the game quicker, for a fee. Through this model, they lowered barriers to entry and democratized its economy. They have been operating in the Philippines and quickly expanded to emerging economies like Indonesia, Vietnam, Africa and Latin America – and this model is being replicated by Web3 and Metaverse companies. One example is XLD who is positioning to be the bank of the Metaverse.


Companies understand that their customers are increasing in sophistication, and want experiences that are as frictionless as they are secure. It's not just users and participants of Web3 we are talking about. Many financial services we use frequently still involve a lot of friction especially during account opening and onboarding. Some banks still require customers to go to the branch to verify in-person. Some have improved this process to use of manual video identification, but with the pace that the new economy is growing, banks have found that the old ways are neither suitable nor scalable. And that's where ADVANCE.AI can help, starting from onboarding.


ADVANCE helps to ensure inclusive, frictionless, and secure digital experiences


A key focus of ADVANCE.AI is making technology accessible. We have trained our AI models to recognise images captured by a low-resolution camera while still maintaining a very high matching accuracy (above 99%). This empowers the vast majority of our unbanked and underbanked population who can only afford a low-end smart phone. This presents a lot of opportunities for enterprises wanting to serve this market.


To acquire customers quickly, companies will usually execute campaigns offering tokens or cash rewards to incentivise new sign-ups. These have become opportunities for fraudsters and organised crime to strike. ADVANCE's solutions help do the hard work by verifying identities and monitoring transactions end-to-end, allowing companies to perform AI-powered Know-Your-Customer (KYC), Know-Your-Business (KYB), and Know-Your-Transaction (KYT) from the get-go so companies and consumers can transact with peace of mind. We believe that hyperprotection makes hypergrowth sustainable.


It's not just about providing eKYC or video KYC but an entire frictionless process that protects against bad actors and evolving fraud. The recent hacks involving still images, fingerprints, biometric cloning in some emerging markets are fraud cases that our video KYC and ID Document Recognition solutions can help prevent.

"We understand the need for alternative credit scores in a country
like the Philippines where bank penetration is not that large."


Equitable access to credit is another key facet of financial inclusion. We understand the need for alternative credit scores in a country like the Philippines where bank penetration is not that large, more so credit penetration. Many of our citizens are new to banking and therefore not scorable by traditional means. ADVANCE.AI serves markets and financial industries by crunching alternative credit scores based on consumer behaviors in telco, e-commerce, and even on-chain – and empower businesses, from traditional banks to fintech startups, to serve these previously unscorable customers. So really, we want to enable the full customer journey by reducing friction and ensuring full protection throughout the experience.


On the commercial end, ADVANCE.AI collaborates with customers in ensuring a healthy Lifetime Value (LTV) to Customer Acquisition Cost (CAC) ratio. We commit ourselves to long-term mutually beneficial relationships. We are focused on growing the pie with our partners and customers.

ADVANCE helps enterprises navigate the Hype Cycle


For financial institutions, initial growth through aggressive and incentive-fueled customer acquisition is just the first step. Companies that are successful in the long-term are able to minimise churn and retain most of the customers they have acquired. The often-cited Gartner Hype Cycle illustrates the maturity and adoption of technologies/applications and how they evolve from early proof-of-concept to potentially solving real world problems at scale. ADVANCE.AI provides the technologies to help enterprises navigate through ups, downs, and stabilization of this cycle.


In essence, companies need to consider strategies for the long-term, from revenue to risk management – aligned with constantly changing customer preferences. Promos and incentives are one way to for companies to increase sign-ups at the start, as covered earlier, verifying customers' identities to stop fraud is key at this stage. But as businesses grow, it's important to think of customer growth and your team's growth too. Helping your team automate processes while ensuring all the compliance checks through our OneStop Platform may be a consideration. As your team is growing too, across functions and geographies, our one-stop solution can help to enable better efficiencies with no-code/low-code workflows and reduced manual reviews.


You may already know this: ADVANCE.AI is part of the Advance Intelligence Group, which lets you tap into our extensive and ever-growing business, merchant and consumer insights. This ADVANCE advantage along with our commitment to always provide you with the most up-to-date solutions and products means you have a tech partner that grows with your business needs and today's ever-evolving business landscape. I'd love to explore how ADVANCE.AI can partner with you for your organisation's growth, so do contact us to take the conversation further.


Want to learn more? Get in touch with our team for a demo.


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