Philippines: 5,000% surge in digital payments in the time of COVID-19

MASSIVE SURGE: The Philippine central bank (Bangko Sentral ng Pilipinas, BSP) has reported that as a result of the pandemic, the use of e-payments has spiked “more than 5,000%”, thanks to the increasingly ubiquitous use of QR codes to move money between people and merchants, even as the economy reopens to a “new normal”. A view of the Philippine central bank (BSP) building on Roxas Boulevard fronting Manila Bay.

DIGITAL CASH: The volume of PESONet transfers surged to 15.3 million transactions, up by 376% year-on-year. The value of PESONet transactions, meanwhile, rose by 188% to reach P951.6 billion. During the same period, payments made through InstaPay reached 86.7 million transactions, up by 459%. PESONet is a new electronic fund transfer service that ties banks, e-money issuers or mobile money operators together to transfer funds in the local peso currency to another customer of other participating banks, e-money issuers or mobile money operators in the Philippines.

SIGN OF THE TIMES: A neighbourhood "sari-sari" store, with COVID-19 safety markings on a plastic cover, and a QR code for loading mobile phone data credit. Payments in rural stores like this one (in eastern Philippines) are still mostly done in cash (it says "bring the exact amount"). But the digital payment option is also available. It's an increasingly common sight, and emblematic of the times. The word "sari-sari" is Filipino (Tagalog) for "variety" or "sundry".

LAST MILE CHALLENGE: Payments for last-mile transport, like the "jeepney" service, are yet to join the digital journey. But ride-hailing service Grab has been roped in early by the e-cash ecosystem. The total value of digital transactions in the Philippines is projected to hit $15.05 billion by end-2021, a massive jump from 2020, according to data analytics company Statista. This is probably at the lower end of estimate. GCash, a popular digital wallet platform, reported 1 trillion pesos ($20.8 billion) in transaction value in 2020.

JUMP IN DIGITAL BILL PAYMENTS: The majority of Filipinos used digital payments to pay for bills (44%) and groceries (36%) as of November 2020, according to global payments platform PayPal. This is a big jump from 2015, when the share of digital payments was only about 1% by volume (26 million out of 2.5 billion payments per month). Roxas Boulevard in Manila, fronting the Bay.

LEADING THE MOVE: The BSP is spearheading the digital payments move. By 2023, the BSP targets to convert 50% of the total volume of retail payments into digital. The BSP has partnered with the “Better Than Cash Alliance” to push e-payments. “The BSP will continue to engage the public to ensure that Filipinos will adjust well to this transformation,” said Bangko Sentral ng Pilipinas Governor Benjamin Diokno at an online press briefing on February 4.

QR PAYMENTS: The country's central monetary authority is pushing the adoption of “QR Ph” for payments. In an online conference with stakeholders attended by BSP Governor Benjamin Diokno, it was announced that the country’s merchants will soon be able to accept QR payments. PayMaya (formerly Smart eMoney, Inc.) was the first fintech firm to adopt the QR Ph for merchants.

MOBILE MONEY: PayMaya is one of the pioneers in mobile money and payments in the Philippines and the first in the country to collaborate with Amazon. PayMaya is the first prepaid online payment app that enables the financially underserved to pay online without a credit card. PayMaya Business allows businesses to receive online and card payments. A huge jump in digital payments ecosystem was seen in 2020 due to the pandemic.

DIGITAL ECOSYSTEM: With over 28 million customers across its platforms and over 200,000 "touchpoints" across the archipelago, PayMaya is building the digital payments backbone of the country to make ‘Cashless Philippines’ a reality for the nation made up of 7,641 islands. “No other fintech company has built this inclusive ecosystem of products, services, and touchpoints that reach a vast majority of Filipinos nationwide. We have made it so easy for ordinary consumers to get a financial account and for merchants to accept a wide range of cashless payments, including PayMaya,” said Shailesh Baidwan (inset), PayMaya President.

“SMART MONEY, SMART PADALA": Another solution is Smart Money, the world’s first e-wallet linked to a mobile phone. Its Smart Padala is the leading remittance network in the Philippines with over 15,000 agents across the country. PayMaya Philippines is a subsidiary of Voyager Innovations, the digital innovations company of PLDT and Smart.

GCASH: GCash is a leading e-wallet platform in the Philippines, with about 7.5 billion pesos in daily gross transaction value. In 2020, it recorded 1 trillion pesos ($20.8 billion) in transactions. Some 73,000 merchants in the Philippines is enabled for GCash. A scan of a GCash QR code is all it takes to buy food, groceries, pay for cabs, clothes, etc. There’s room to grow: an estimated 6 million micro-enterprises operate in the country, according to official government estimates.

TAX PAYMENTS THOUGH E-CASH: Tax payments in the Philippines through the GCash e-wallet app climbed by 286% to P1.5 billion in 2020, boosting e-payment growth for the government’s main tax agency, according to Martha Sazon, Gcash president and chief executive.

UPSIDE OF DIGITAL: Digital payment is defined as a monetary transaction between two parties (individuals, businesses, or government) through a digital payment instrument (such as cards, bank transfer, mobile wallet, etc.) in which both the payer and the payee use an electronic medium. Experts point to the biggest upside of digital payments: it lowers transaction costs, eliminates barriers to owning a transaction account, reaches tens of millions of “unbanked” customers, and speeds up commerce. Photo shows a typical street scene in the Philippines.

CASHLESS SHIFT: “Consumers (are) now more conscious about health and safety. Cashless has fast become the default preference of Filipino consumers,” said said PayMaya President Shailesh Baidwan. In response to merchants turning to digital, the company launched the PayMaya Negosyo app. 

MERCHANT QR IN 24 HOURS: The app enables MSMEs to have their own merchant QR in as fast as 24 hours. They can then readily accept cashless payments via QR, bank transfers, and through e-Wallets, using only their mobile phones.

TENS OF MILLIONS OF ‘UNBANKED’ GOING DIGITAL: A great majority of the first-time digital payment users in the Philippines are “unbanked”. According to the Philippine central bank’s (BSP) survey, 71% of Filipino were still “unbanked” (i.e. no bank account) as of end 2019. Only 29%, less than 3 out of 10, had bank accounts till then. The 6% rise from 2017 (23%) represents an additional 5 million. The country has more than 108 million inhabitants. BSP Governor Benjamin Diokno (photo) told an industry forum that there are 77 banks and e-money issuers that coursed transactions through PESONet and 52 via InstaPay as of end-March 2021.

GOVERNMENT PAYMENTS: The EGov Pay facility where consumers can settle payments to government institutions and agencies also saw a surge in both volume (1,775%) and value (6,603%) at the end of the first quarter of 2021 from a year earlier. Photo shows the Manila City Hall in the foreground.

FINANCIAL INCLUSION: Philippine monetary policy makers have adopted “financially inclusion” as part of their target by 2023. They key driver is digital technology. The BSP set out a vision for modernising retail payments, pushing a number of significant regulatory reforms. The Philippine Government has also led by example, becoming the most digitised stakeholder in the e-cash ecosystem, with 64% of all government transactions carried out digitally as of 2019.

DIGITAL DONATIONS: Donating to church or charitable organisations had also been made easy, thanks to the QR system. By scanning the QR codes of religious groups and other faith organisations, the Philippine Red Cross, UNICEF, Oxfam Pilipinas, and the UP-PGH Medical have their own digital donation portals. Catholic faithful sit outside the Quiapo church in Manila in this file photo taken October 9, 2020.

MONTHLY TRANSACTIONS SPIKE: In 2019, it was estimated that there were 470–490 million digital transactions every month in the Philippines. That’s a nearly 20-fold increase in six years, from the number of monthly digital transactions in 2013, according to the Philippine central bank. A scene in Makati, Manila's financial district.

TECH SOLUTIONS: PayMaya, a leading digital payments platform, has launched its “One Lite” device for in-store card and e-Wallet payments, as well as digital payment tools such as Digital QR, Payment Links, and PayMaya Checkout payment gateway plugins which can easily be availed by visiting its site. A twilight view of Manila Bay.

QUICK RESPONSE: PayMaya QR enables small retailers to accept cashless payments from customers – promoting safer and more convenient transactions. As of end-November 2020, Philippine digital payments platform PayMaya reported a 2,000% jump in the number of micro-, small-, and medium enterprises (MSMEs) utilising its various digital payment solutions.

2,000% JUMP IN USERS: The exponential growth signifies a “sea change” in how Filipino merchants are doing business as a way to cope from the economic effects of the pandemic. 30 million young people between the ages of 10-24 account for 28% of the Philippine population, the largest generation of young people in its history.

CARD, E-WALLET PAYMENTS: PayMaya One Lite device enables micro, small and medium enterprises to accept card and eWallet payments from customers – promoting safer and more convenient transactions in the new normal.

NEW NORMAL: More Filipino business owners and casual sellers are embracing digital cash as a key component of doing business, propelled by ready business-in-a-box solutions from digital financial services. MSME segment now comprises over 95% of PayMaya’s total merchant base in 2020, from just 78% in 2019, according to PayMaya President Shailesh Baidwan. Its solutions are designed to serve the country’s more than 1.5 million registered MSMEs which accounts for more than 99% of all Philippine businesses and provides 62.4% of the country’s employment. 

MILLIONS OF MICRO-ENTERPRISES: Data from the Philippines’ Department of Trade and Industry (DTI) show that there are 6 million more micro-enterprises that have yet to formally register, and e-wallet platforms are already enabling this segment through their various digital cash services.

POWER SHIFT: It’s hard to ignore the on-going digital transformation. With this shift, Philippine e-payment platforms such as GCash and PayMaya have enabled micro, small and medium enterprises (MSMEs) to thrive and provide additional income opportunities amid a crazy pandemic-driven period.

TARGET: The BSP, the Philippine central bank, seeks to expand “financial inclusion” to 70% of Filipino adults, by “on-boarding” them to the formal financial system through the use of payment or transaction accounts. “With the use of these accounts over time, they are able to build financial profiles with their payment service providers (i.e. banks and non-bank e-money issuers),” the BSP stated in a policy paper.

VISION: The BSP’s “Digital Payments Transformation Roadmap 2020-2023” outlines its strategy to foster the growth and development of digital payment innovations, and promote further “financial inclusion”. Due to COVID-19 pandemic fears, Filipino consumers have warmed up to digital payments, and are starting to shun cash. Alongside the introduction of a National ID system, the confluence of trends has significant implications for the overall economy that goes beyond the pandemic.