IDfy and Mastercard roundtable highlights the role of verification, alternative data and progressive lending in expanding financial inclusion
Manila, Philippines — For millions of micro, small and medium enterprises (MSMEs), becoming part of the digital economy may be easier than accessing the credit needed to grow within it.
Industry leaders say improving how small businesses are verified and assessed could help bridge this gap, particularly for merchants without conventional credit histories.
The issue was discussed during The Anatomy of Merchant Trust, an executive roundtable co-hosted by IDfy and Mastercard in Manila, which brought together executives from banking, fintech and payments to examine the foundations needed to build a more inclusive digital merchant ecosystem.
The Philippines has seen strong growth in digital payments, with Bangko Sentral ng Pilipinas (BSP) data showing that QR Ph adoption has surpassed 57 percent. However, the growing use of digital payment channels has also highlighted gaps in the infrastructure used to onboard and assess small merchants.
For many micro-businesses, identity and business verification remains fragmented. Without sufficient verified information, financial institutions may have limited visibility into a merchant’s operations and risk profile.
This can result in legitimate businesses being excluded from formal financial services simply because they lack traditional documentation or established credit histories.
Leaders at the roundtable said modernizing merchant onboarding could help change this dynamic.
Automated, risk-based verification can replace some legacy paper checks and physical audits, allowing institutions to onboard legitimate merchants more efficiently while maintaining appropriate controls.
Internal polling during the session reinforced the need for this modernization. Business document verification and compliance checks were identified as the highest-priority workflow for automation, receiving a score of 4.4 out of 5.
Government efforts are already helping more small businesses enter the digital economy. The DTI’s Tindahan Mo, e-Level Up Mo! initiative, for example, has helped equip thousands of small merchants with digital literacy and cashless payment tools.
The next challenge is ensuring these businesses can translate digital participation into broader financial access.
“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.”
Alternative data could play an important role in closing the credit gap. Digital payment records, utility payments and transaction footprints can provide lenders with additional indicators of a merchant’s activity and financial behavior.
Combined with progressive lending models that increase credit limits as businesses demonstrate growth, alternative underwriting could potentially unlock formal financing for more than one million underserved merchants nationwide.
At the same time, financial institutions need to ensure that greater access does not create additional exposure to fraud.
Continuous monitoring and real-time behavioral analytics can help identify threats including document forgery, deepfakes and post-approval misuse, allowing institutions to protect their ecosystems while minimizing disruption for legitimate merchants.
“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, better merchant data and smarter risk assessment can help shift financial inclusion from simply providing access to digital payments toward creating pathways to capital, growth and long-term participation in the formal economy.
For more information on the roundtable discussion, visit www.idfy.ph.