The financial sector must modernize how it verifies, protects, and extends credit to millions of unique micro, small, and medium enterprises (MSMEs) to accelerate financial inclusion across the Philippines, industry leaders urged.
At ‘The Anatomy of Merchant Trust’ executive roundtable co-hosted by IDfy and Mastercard in Manila, executives across banking, fintech, and payments concurred that while consumer adoption of digital payment channels like QR Ph has surged past 57% according to Bangko Sentral ng Pilipinas (BSP) data, traditional merchant infrastructure must evolve to serve the distinct needs of every small vendor, from urban startups to neighborhood sari-sari stores.
The discussion highlighted a critical systemic challenge currently holding legitimate businesses back. Because traditional merchant identity verification remains fragmented and unverified at the micro-level, it trickles down to ecosystem-wide trust issues that compel institutions to enforce rigid, blanket risk policies. Consequently, vast numbers of honest, high-potential merchants who simply lack paper credit histories are turned away from the formal digital economy.
Leaders present at the event highlighted the importance of addressing the gap to complement government-led empowerment efforts. Initiatives like the Department of Trade and Industry’s (DTI) “Tindahan Mo, e-Level Up Mo!” have successfully equipped thousands of small merchants with digital literacy and cashless payment tools. Financial sector leaders emphasized that by streamlining merchant onboarding, such as replacing legacy paper checks and physical audits with automated, risk-based verification, banks and fintechs can seamlessly welcome these newly enabled businesses into the fold.
Internal industry polling conducted during the session underscored this sentiment, with executives identifying business document verification and compliance checks as the single highest-priority workflow for automation, scoring 4.4 out of 5.
Beyond onboarding, attendees noted that safeguarding merchants requires moving from point-in-time checks to continuous protection. By deploying real-time behavioral analytics and continuous fraud monitoring, institutions can defend against threats like document forgery, deepfakes, and post-approval misuse without placing unnecessary friction on legitimate vendors.
“Merchant trust is no longer a one-time verification exercise—it is a continuous lifecycle,” said Raghuraman Chandrashekhar, PH Country Head of IDfy. “As digital payments scale across the Philippines, institutions must move away from fragmented onboarding and adopt intelligent, risk-based systems that unify identity verification, alternative data, and real-time monitoring. The future of financial inclusion depends on enabling MSMEs to be onboarded quickly and safely at scale.”
To bridge the credit gap for small vendors, financial institutions are increasingly leveraging alternative data, such as digital payment records, utility payments, and transaction footprints. Paired with progressive lending models that scale credit limits as merchants grow, alternative underwriting could unlock formal financing for over one million underserved merchants nationwide.
“Merchant trust extends well beyond onboarding. As more businesses participate in the digital economy, the industry needs to strengthen collaboration across banks, payment providers, fintechs, and technology stakeholders,” said Jason Crasto, Mastercard’s Country Manager for the Philippines. “Each stakeholder brings unique capabilities, perspectives, and expertise to the table. Through stronger public-private collaboration, shared intelligence, and advanced risk solutions, we can build a more secure, scalable, and inclusive digital ecosystem that empowers Philippine MSMEs to grow with confidence.”
By rebuilding onboarding foundations and adopting continuous risk intelligence, industry leaders agreed that the Philippines can transform strict risk barriers into pathways of opportunity, ensuring every legitimate merchant has the access, security, and capital needed to thrive in the digital economy.
