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Wednesday, December 7, 2022

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Data Analysis and Digital Transformation to Bolster Financial Inclusion

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The need to drive digital transformation and increase the role of data in achieving greater financial inclusion across the Philippines was clear to all those that attended TransUnion’s recent Big Data Summit in Manila. Industry leaders and wider stakeholders gathered to discuss recovery and growth, along with the impact of digital transformation on consumer behavior, and the roadmap for further digitalization. 

Government institutions, businesses and financial institutions all have a role to play in making digitalization and financial inclusion possible, as they work together to provide solutions and services that fulfill their roles as economic enablers, empowering more people to participate in the formal financial system. 

For example, The Bangko Sentral ng Pilipinas (BSP) designed a three-year digital transformation roadmap hinged on strengthening customer preference for digital channels, and the creation of more digital financial services that make the innovative use of consumer data possible. 

This roadmap is already yielding results. In 2021, the share of digital payments based on volume was at 30% – strong progress in the BSP’s goal of converting 50% of the total volume of payments into digital form. This figure is significant considering that payment services are the gateway of most Filipinos to the formal financial system.  

With the BSP focusing on four enablers that will lead the digital transformation of the local financial sector – Payments Digitalization, Digital Banking Framework, Open Finance Framework, and a Regulatory Sandbox – it is responding to public demand for faster, more convenient, and secure financial products and services by creating an environment that encourages innovation to flourish. 

The Philippines’ Department of Information and Communications Technology (DICT) supports this. With its mandate to spearhead the national ICT development agenda, this includes improving internet connectivity across the nation and the development of the National ICT Portal for effective data consolidation and dissemination. These efforts help promote digital transformation in the government to facilitate better public service delivery. 

Key initiatives include the adoption of a Cloud First policy for government administration and the delivery of services, the creation of a National Government Portal (NGP) to serve as a one-stop shop for government data, information, and services, a Central Business Portal for all business registration needs, and the Electronic Know Your Consumer (eKYC) for financial institutions, businesses, and local government units to verify identities through a higher degree of automation. 

Broadening the scope of digital financial inclusion in the country can be transformational for Filipinos who lack effective access to formal financial services. The most recent TransUnion Consumer Pulse Study highlights that a growing percentage of Filipinos are more comfortable with transacting online, with 77% of respondents using digital financial services – up from 73% in the previous quarter. 

When asked about the percentage of transactions they complete online, only 5% of respondents reported not carrying out any online transactions. For those who do, 5% conducted 76-100% of their transactions online, 22% reported doing 51-75% of their transactions online, 35% did 26-50% of their transactions digitally, while 34% accomplished anywhere from 1-25% of their transactions online. 

As the country continues to shift towards a digital financial system, we recognize that both technological advancements and the vast amount of data produced by businesses are important contributors in developing the local economy. Data allows businesses to make more informed decisions and helps form a reliable basis for trust. The volume of data constantly generated and processed provides more timely and robust insights into how consumer behaviors can change. This highlights the need for businesses to respond swiftly to those changes.

Inclusive digital financial efforts can also bring in a new generation of data footprints, allowing financial institutions to reach out to consumers who were previously overlooked. Further analysis of data leads to knowledge and solutions. These solutions in turn present opportunities to create new financial products and services for both consumers and businesses. By creating greater access to credit products and services, lenders can attract and build loyalty among segments of the population who are credit invisible. 

Through analytics, integrated solutions, and insights, TransUnion is dedicated to finding innovative uses for information and the insights derived from it, to make better and smarter decisions. To bridge the gap between consumers and businesses, TransUnion harnesses the power of alternative data such as mobile data, including reloads, payments, mobile data usage, and device data in CreditVisionTM Link, launched in the country last year. This enables lenders to expand their reach by accurately scoring those with little to no formal credit data to assess their creditworthiness and create behavioral insights that can open opportunities for consumers and lenders to engage. 

As the Philippines undergoes digital transformation and with more Filipinos growing increasingly comfortable with transacting digitally, the challenge of ensuring information security remains. To help both businesses and consumers transact with confidence, TransUnion uses data, software, and technology to provide comprehensive profiles of consumers so they can be safely and reliably represented. This is what it means to use “Information for Good”. 

Digital transformation and collaboration are pillars to driving more inclusive growth for our country. Data solutions offer new perspectives that promise more accurate, efficient, and inclusive results. As a provider of information solutions, TransUnion utilizes data to lay the foundations of mutual trust between businesses and consumers. Through the power of information, they make better financial decisions that can aid in our economic recovery.

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