Online Lending in the Philippines
Online Lending in the Philippines
No industry is left behind when it comes to the surge in technological innovation. From the retail landscape with online shopping and the food and beverage industry with online deliveries and vouchers and the use of social media as a marketing tool, the world is moving from the traditional to the digital sphere. The finance and banking industry is no exception, from apps that track your expenses to electronic banking. This is more apparent with the presence of online or digital lending.
Online lending, also commonly called business financing by business owners, is financing through the use of online platforms. Yesterday, if you wanted a loan, you went to a bank branch, submitted documentary requirements, and filled up the paperwork. Today, all that – from applying for the loan to receiving the funds – can be done online. Even better, the digital lending process is more efficient and streamlined than traditional methods. This is because online lending institutions have the infrastructure to be able to automatically process data quickly. Once you submit complete requirements, you’ll know if your application is approved in as fast as 24 hours. As for accessing your funds, the capital is immediately deposited to you.
More than that, there is a variety of online financing options that caters to both consumers and businesses. Whether you need a personal or a business loan, online lenders cover that. First Circle, in particular, offers financing to SMEs to meet short-term capital needs.
As online lending gains more traction in the country, now the question is what more is there to know about online financing and where is it headed in the Philippines?The points below address these:
Need for Market Education
You probably know of someone who prefers to carry cash rather than card and bank in-person than online or electronically. A few Filipinos are hesitant to use the internet when it comes to their finances, as they feel it’s less secured than having cash-on-hand; however, as technology advances so do the safety and security measures taken by institutions that adopt digital banking. At present, individuals need to be educated on both the advantages and disadvantages of digital banking, online lending included. More than that, online lending is more than applying for a loan. There are multiple products to choose from, and each one differs from the other.
More Diverse Products
Online lenders have better online infrastructure therefore, financing is constantly innovated. Previously, financing, especially business financing, was limited to term loans and line of credit. Today, there are multiple types of financing catering to various business needs. Some of the available types of loans are secured and unsecured loans, short- and long-term working capital, and equipment, property, purchase order, and accounts receivables financing. This is happening now and many have benefitted from taking out business loans that have helped them scale. As the world advances, so will the products being offered.
Partnerships with Other Financial Institutions
Two heads are better than one, and online lenders are partnering up with traditional financing institutions. It’s happening now with consumer loans. Online lenders have the online infrastructure to process data automatically and quickly while the latter have the stability and larger amounts of capital to lend. Online lending institutions are also quick to change their underwriting procedures, which will continue to benefit businesses and those looking to takeout a business loan. In the future, it’s most likely partnerships between these two will prosper as what’s happening now in other parts of the world.
Convenient, Ethical and Progressive Online Financing
A decade ago, online banking wouldn’t have been thought to be possible. As technology advances, so will innovations in the finance and banking industry.Online lending came about as traditional financial institutions became more stringent as to whom they will lend to after the 2008 financial crisis. They wanted less risk, lent to a few, and thus, access to additional capital became sparse. That was yesterday. Today and tomorrow, there is and will be better infrastructure to cater to both borrowers and lenders to make online lending more convenient, faster, and efficient.
Also, as the fintech industry matures in the country, more laws are being established to ensure borrowers’ security. Government agencies and regulators, and FinTech Alliance Philippines formalized a new code of conduct on responsible online lending. It essentially enforces all members to implement all stipulations of the DPA 2012, specifically in transparency, not using abusive collection practices, using data responsibly, prevent excessive disbursement of loans, and more. This should ensure individuals and SME owners that FinTech companies are expected to strictly adhere to the DPA. If not, companies who do violate this will be sanctioned.
At First Circle, we do not engage in any of the malpractices that violate the DPA 2012. Since 2018, we have not only adopted the DPA and incorporated it to both internal and external business operations and partnerships, but continue to work together with government institutions and regulators such as the NPC and the SEC to find better ways to protect the privacy of our clients and even our employees.
As online lending grows exponentially and progresses in the years to come, it will continuously expand product lines to building better infrastructure that will enable it to provide fast and convenient business financing.