The economic impact of the spread of coronavirus has hit hard the digital banking industry and neobanks borrowers, according to a new report. the report also focuses on how the industry can grow post pandemic.
A pandemic-induced economic crisis in the Philippines has affected almost every facet of the country’s industries. However, it is individuals who have taken the biggest hit, after the lockdowns were implemented, taking their ability to earn a living. This has also affected many people’s borrowing ability, with coronavirus affecting their ability to pay outstanding loans and hence ending up with bad credit profiles.
Report on neobanks
A new report from Fitch Ratings, that was sent to the media addresses this very problem and highlights its impact on neobanks and the future of the banking industry. The neobanks industry makes use of the digital platform to conduct all banking activities such as depositing and getting loans exclusively.
The Fitch report stated that among the Association of Southeast Asian Nations(ASEAN), the Philippines and Indonesia had the greatest potential of growing their digital banking industry, due to their large numbers of unbanked citizens.
Potential for growth
Currently, it is estimated that only 29 percent of the Philippines’ adult population of 72 million have formal bank accounts. This means that the country still has a market for growth that stands at over 51 million people, the Fitch Rating report argued. The greatest hindrance for these huge numbers of unbanked citizens, the report argued, was because of a lack of funds to open new accounts.
However, neobanks offers an opportunity for many who are not able to open formal accounts, that has seen the growth of the industry in the country.
The coronavirus, however, is reversing gains made over the years by neobanks, which has decimated their ability to lend money. Considering their weaker borrowing profiles, it has become a difficulty to continue efficiently post-pandemic.
This is coupled with people’s ability to repay the loans and the digital infrastructure in the Philippines has also contributed greatly to the struggle of these neobanks, according to the Fitch Rating report. The report, however, added that incremental asset size and deposit restrictions would see this bank leveling the competition.
Featured image by Pixabay
