Cashless Economy - Philippines
Driven by the rapid conversion from cash to non-cash despite macroeconomic headwinds, global payments revenues are projected to grow nearly 9.5% year-over-year in 2022, following a positive trajectory for the next decade to reach $ 3 trillion US Dollars by 2031.
These findings were published in our recent Global Payments 2022: The New Growth Game report. As economies return to normal, the payments industry in Asia Pacific is also growing steadily, fueled by increased competition, higher "platform" rates, innovative disruptions, and greater involvement of regulators, governments, and central banks. The volume of non-cash payment transactions increased by 28% between 2016 and 2021 and is expected to increase by 17% over the next decade. The Philippines is among the Southeast Asian markets that have experienced strong shifts towards non-cash payments, with overall transaction volume growth of 30% from 2016 to 2021. This non-cash payment volume is expected to increase more than three times by 2031. The country has also seen a healthy growth of 9% in transactions with paper (from 2016 to 2021) and should grow by 10% in the next decade.
These results strongly confirm the data published by the Central Bank of the country, Bangko Sentral Ng Pilipinas (BSP), which declared that the percentage of digital payments increased to 30.3% in 2021, which represents 44.1% of payments to the Total detail in 2021, above 26.8% of 26.8% recorded a year earlier. With the aim of transforming the country into a low-liquidity economy, while promoting greater financial inclusion, the BSP aims to convert 50% of total retail transactions in the country into electronic channels by 2023. It also aims to increase the number of Filipino adults with bank accounts. represents 70% by 2023.
FAVORABLE REGULATION
To achieve these goals, the country is seeing an increased focus on digital payment innovations through policies, regulations, and collaborative partnerships with national payment system stakeholders. One of the key pillars of the BSP's 2020-2023 Digital Payment Transformation Roadmap is the development of digital payment flows to increase acceptance and wider use by government, individuals and businesses. The Philippine government currently represents the largest volume of digitized payments in the country, having adopted the channel to promote the use of bank accounts for the disbursement of salaries and social security. It actively encourages the private sector to use transaction accounts like bank accounts, e-wallets, and e-payment systems like PESONet to pay salaries and other monetary benefits. In fact, PESONet transactions have increased by 48.1% from January to June 2022. The government is also increasingly encouraging the adoption of services such as EGov Pay and InstaPay for the payment of taxes, permits and fees. Businesses in the Philippines, while slower with digital adoption, are benefiting from greater interoperability within the country's previously fragmented QR-based payment services industry. The introduction of the Philippine national standard QR code, QR PH in 2019 for person-to-person (P2P) payments, initially targeted mainly payments and remittances in the informal sector. This was followed by the QR PH person-to-merchant (P2M) payment structure in October 2021 to enable interoperable digital payments between customers and merchants including between different financial service providers in the country. As of April 2022, more than 473,000 businesses across the country (nearly double the previous month) and 17 financial institutions had adopted the P2M structure. In 2023, BSP and Philippine Payments Management, Inc. (PPMI) will implement additional initiatives to facilitate bill payments and direct debits. Backed by stricter digital governance standards, the country is also seeing investments in its digital payments infrastructure, including integrating the Philippine Identification System (PhilSys) with electronic Know Your Customer (e-KYC) capabilities and adoption. of open banking framework.
ZERO COMMISSIONS ON MICRO TRANSACTIONS
In order to increase the use of QR PH among MSMEs and increase cashless transactions within the country, the BSP has eliminated fees on payments to merchants using QR PH P2M. This move is making payments to micro-businesses like sari-sari (sundries) and wet market shops more attractive, while also supporting person-to-person remittances for small-value transactions like jeepneys or tricycle fares.
QR PH P2M uses InstaPay, one of the two electronic payment structures of the central bank's National Retail Payment System (NRPS), for its transactions. Currently, banks and electronic money institutions (EMIs) may or may not charge reasonable fees to merchants using the QR PH P2M facility. Since it is cheaper than using a point of sale (POS) terminal, more micro-merchants are being encouraged to open transaction accounts with banks and EMIs.
The interoperability of the QR PH facility, coupled with the zero-fee policy, is also fueling stiff competition between the country's two major e-wallet operators. GCash has more than 139,000 merchants with 60 million registered users as of May 2022, while PayMaya has more than 116,000 business partners and over 47 million registered users as of March 2022.
ELECTRONIC WALLET PLAYERS
Both payment operators in the Philippines offer loan services as alternative sources of income. In April of this year, just six months after obtaining the digital banking license from the BSP, PayMaya launched Maya Bank to include online banking services along with e-wallet, cryptocurrency trading, and micro-investments. It has gained a million customers within five months of its launch.
GCash said it had provided more than P 40 billion in loans in September 2022 and had 1 million active borrowers at the end of June. It also has a range of lending products, including GCredit, a revolving mobile line of credit to pay for goods and services; GLoan, which provides pre-approved unsecured access to cash loans up to P25,000 instantly, and GGives, a flexible Buy Now Pay Later (BNPL) payment solution with low-interest rates. It plans to launch GStocks in partnership with the Philippine Stock Exchange (PSE) and brokerage AB Capital Securities. These trends mimic what is happening in other Asian countries. Bharat Pe, India's only e-wallet, took advantage of the zero MDR (Merchant Discount Rate) policy to expand its business to include loyalty cards and merchant lending services. In four years, it welcomed 10 million merchants in over 400 cities in India, reaching $ 20 billion in total annualized payment volume. Thailand's True Money launched its TrueMoney payroll service in Indonesia to offer businesses with non-bank employees’ access to online payroll. Everything indicates that the payments sector in the Philippines is ready to be catalyzed. And with the country set to record the highest consumption growth in ASEAN by 2030, driven by food and beverage (F&B), which will account for up to 40% of consumption, the opportunities for growth and innovation in the payments industry are plentiful. . Backed by a progressive government that leads by example to transform its digital payments industry and promote financial inclusion for all sectors of society, now is the time for companies to increase adoption and bring digital payments into the Philippines to the next level.
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