According to the 2019 Financial Inclusion Survey by the Bangko Sentral ng Pilipinas (BSP), only 29% of Filipino adults had bank accounts. This means that there are more than 51 million unbanked citizens in the country and that cash is, apparently, still king.
However, despite this seemingly unfavorable picture, electronic payments is now gaining traction. Here are just a few signs indicating that the Philippines is heading toward a digital economy.
The Launch of QR Ph
QR Ph is essentially the national QR code standard. Launched in the first half of 2019, its ultimate goal is to create a more efficient and streamlined payments system in the Philippines. It also supports the BSP’s goal of financial inclusion, particularly for small businesses and consumers. This way, even unbanked Filipinos can enjoy the benefits of digital transactions.
The BSP also stated that QR Ph supports its goal to transition the Philippines into a “cash-lite” state. What’s more, contactless payment solutions like QR codes are also in support of the government’s push for reducing physical contact. This way, small businesses can stay afloat while minimizing the risk of spreading or contracting COVID-19.
The Huge Surge in Electronic Transfers
According to the data presented by the BSP in the GBED Talks last October 2021, the share of digital payments versus total transactions grew to 20.1% in 2020. This is a growth of more than 10% from 2018 and also considerably higher than the 9% increase recorded from 2013 to 2018. The 20.1% volume of digital payments in 2020 also means that one out five retail payments were made digitally.
This growth can be attributed to the following factors:
- Payments to merchants grew by 47.8% from 2019 to 2020
- Person to person payments grew by 18.1% in 2020, which are mostly composed of e-wallet money transfers.
- Fully digitized disbursement of government employee salaries by the end of 2020.
This is not to mention the growth of e-wallets and digital payments platforms like Maya, which boasts more than 38million customers. . As of November 2020, Maya has reported a 2,000% increase in MSMEs using its array of digital payment solutions.
E-Payments Reaching Trillions in Value
One of the COVID prevention measures that both the government and health experts encouraged is the use of cashless, contactless payments—and it appears that Filipinos listened. BSP data shows that P2M payments accounted for 71.6% of total monthly retail payments volume, 85% of which are digital payments.
The volume and value of digital payments also continued to grow despite the resumption of fees from PESONet and InstaPay. The total volume of payments from the two EFTs totaled up to 47.1 million transactions, which is equivalent to a value of Php 674 billion. This represents a year-on-year growth of 36% in volume and 52% in value as of September 2021.
Global payments platform PayPal also revealed that as of November 2020, Filipinos used digital payments for paying bills and groceries most often. This is another huge jump from 2015’s numbers, in which digital payments only comprised 1% of the total volume of payments per month. (Survey Reveals Increase Use of Digital Payments During Pandemic – Manila Bulletin (mb.com.ph))
The Popularity of E-Commerce
Before the pandemic, the Philippines was one of the slowest adopters of online shopping, due in part to the presence of malls and shopping centers in key areas. In addition, during the very early days of e-commerce in the country, only those who had bank accounts were able to shop online because they had to pay with a credit card.
Thanks to technology, however, more and more Filipinos now have access to online stores. Aside from more affordable smartphones and better internet infrastructure, banks and other financial institutions have also made it easier for consumers to pay for their purchases.
The pandemic also affected people’s mobility, which caused a further surge in the growth of the e-commerce industry in the Philippines. With Filipinos unable (or hesitant) to step out and shop in person, online shops were the go-to for necessities. Some people who lost their jobs or wanted to supplement their income also turned to online selling.
The CHIP Initiative
In 2021, the Department of Information and Communications Technology (DICT) launched the Connect, Harness, Innovate and Protect (CHIP) conceptual framework. Its goal is to make the country better prepared for the digital economy. It also aims to expand the adoption of digital services, particularly mobile payments and e-commerce. CHIP also aims to digitize government services.
With the CHIP Initiative, the DICT aims to:
- build the digital foundation that helps enable compatibility and interoperability, resulting in financial inclusion (Connect)
- invest in non-digital components, such as technical skills, literacy, and leadership to make the most of the current economy (Harness)
- creating and expanding new business models and services, as well as integrating government and business systems (Innovate)
- minimizing and mitigating cybersecurity risks, ensuring the privacy of users, and preventing digital monopoly and inequality (Protect)
There are still a few barriers to overcome before the Philippines becomes a less cash-heavy society. Still, all the signs indicate that it won’t be long until electronic payments are the norm in the country.
