Industry leaders point to alternative data and progressive lending as potential pathways to MSME credit access
Manila, Philippines — A lack of traditional credit history should not automatically prevent a legitimate small business from accessing formal financing, industry leaders said as they called for better ways to verify and assess Philippine micro, small and medium enterprises (MSMEs).
The issue was among the key topics discussed at The Anatomy of Merchant Trust, an executive roundtable co-hosted by IDfy and Mastercard in Manila, bringing together leaders from banking, fintech and payments.
The discussion comes as digital payments continue to expand across the country. Bangko Sentral ng Pilipinas (BSP) data shows that QR Ph adoption has surpassed 57 percent, bringing more businesses and consumers into digital financial ecosystems.
But digital participation does not necessarily translate into access to credit.
Many micro and small businesses have limited paper trails, formal credit histories or conventional documentation. This can make them difficult to assess through traditional underwriting models, even when they are legitimate and actively conducting business.
Industry leaders said strengthening merchant verification could provide a more reliable foundation for financial institutions to understand these businesses.
Automated, risk-based onboarding can help institutions verify business documents and compliance information more efficiently, replacing some legacy paper-based processes and physical audits.
Internal polling at the roundtable found that business document verification and compliance checks were the highest-priority workflow for automation, scoring 4.4 out of 5.
The need for stronger onboarding also complements government-led digitalization efforts. Through initiatives such as the DTI’s Tindahan Mo, e-Level Up Mo!, thousands of small merchants have gained access to digital literacy and cashless payment tools.
The next opportunity is to help these merchants convert digital activity into a stronger financial profile.
Alternative data such as digital payment records, utility payments and transaction footprints can provide lenders with additional insight into a business’s operations and financial behavior.
Progressive lending can build on this information by allowing credit limits to increase as businesses demonstrate growth and repayment capacity. Together, these approaches could potentially unlock formal financing for more than one million underserved merchants nationwide.
But greater access must be accompanied by stronger protection.
“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.”
Continuous fraud monitoring and behavioral analytics can help institutions identify threats such as document forgery, deepfakes and post-approval misuse, allowing them to maintain trust as merchant relationships develop.
“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.”
For industry leaders, the goal is to create a financial ecosystem where a business is assessed not only by the paperwork it has accumulated, but by a broader and more reliable picture of its identity, activity and risk.
That shift could help more legitimate MSMEs move from being digitally active to being financially empowered.
For more information on the roundtable discussion, you may visit www.idfy.ph.