A new study by the Philippine Institute for Development Studies (PIDS) reveals that more Filipinos are entering the digital financial ecosystem, yet a significant portion remains excluded from formal banking services.
Key Findings on Digital Finance Adoption
The study found that account ownership in the Philippines nearly doubled from 29 percent in 2019 to 56 percent in 2021. Digital payments now account for 57.4 percent of retail transactions. Despite this rapid adoption, more than half of Filipinos are still outside the formal financial system, highlighting a widening gap between digital usage and financial inclusion.
Digital Engagement as a Driver of Inclusion
In the paper titled “Digital Financial Platform Engagement and Financial Inclusion in the Philippines: Insights on AI Deployment and Policy Implications,” PIDS noted that active users of e-wallets, online banking, and digital payment platforms are significantly more likely to own formal financial accounts. “Digital financial engagement is a strong and consistent determinant of financial inclusion,” the authors said, emphasizing that frequent and effective use of digital platforms — not just access — drives participation in formal finance.
Structural Barriers Persist
However, structural barriers continue to limit inclusion, particularly among low-income groups. These include insufficient funds, high transaction costs, lack of documentation, and low trust in financial institutions. The study also highlighted the growing role of artificial intelligence in financial services, particularly in fraud detection, credit scoring, and customer support. While larger financial institutions are advancing AI adoption, smaller players such as cooperatives and savings banks face resource constraints, resulting in uneven technological rollout across the sector.
Imbalance Between Demand and Readiness
This disparity reflects a broader imbalance between strong consumer demand for digital finance and limited institutional readiness, which could slow inclusive growth if left unaddressed. Concerns over fraud, data privacy, and cybersecurity also persist as digital transactions increase, potentially discouraging wider adoption.
Recommendations for Bridging the Gap
To bridge the gap, the state’s think-tank recommended strengthening digital infrastructure, expanding financial and digital literacy, and promoting responsible governance of AI systems. It also stressed the need for closer coordination among policymakers, regulators, and the private sector to address persistent socioeconomic and institutional constraints.
