| Abstract: |
This paper examines how digital financial platform engagement influences
financial inclusion in the Philippines and explores how financial institutions
are deploying artificial intelligence (AI) in enhancing these platforms. It
combines nationally representative data from the World Bank Global Findex
(2021), institutional indicators from the International Monetary Fund (IMF)
Financial Access Survey (2016–2024), and qualitative insights from financial
institutions and policy experts. From the demand side, a Digital Financial
Engagement Index was constructed based on individuals’ usage of mobile
payments, online banking, and digital financial services. Results reveal that
digital financial engagement is a strong and consistent determinant of
financial inclusion: individuals who actively use digital financial platforms
are significantly more likely to own and use formal financial accounts.
However, several barriers persist. The lack of money, high perceived costs,
documentation issues, and low trust remain key constraints among Filipino
adults, particularly among low-income groups. From the supply side,
institutional data from the IMF Financial Access Survey (2016–2024) and
insights from Key Informant Interviews (KIIs) reveal that financial
infrastructure has expanded moderately. While AI adoption remains nascent and
largely concentrated among large, digitally advanced financial institutions,
AI technologies such as fraud detection, credit scoring, and chatbots are
increasingly embedded in the digital platforms where consumers transact. In
contrast, smaller cooperatives and savings and loan associations continue to
face structural and resource-related barriers to adoption. The convergence of
demand- and supply-side evidence highlights that digital financial engagement
serves both as a driver and an indicator of financial inclusion, while AI
adoption within these platforms has the potential to further enhance access,
security, and user experience. Overall, this study provides new empirical
evidence that digital financial engagement significantly enhances financial
inclusion in the Philippines. The study also documents how financial
institutions are strategically deploying AI within these digital platforms,
providing insights for responsible AI adoption that can support inclusive
financial services. By strengthening digital infrastructure, promoting
financial and digital literacy, and ensuring responsible AI adoption, the
Philippines can transform digital financial platforms into a true catalyst for
inclusive and sustainable growth. Comments to this paper are welcome within 60
days from the date of posting. Email publications@pids.gov.ph. |