It will take a few more decades before the majority of the Filipinos would be comfortable with cashless transactions.
The expanding economy backed up by high consumer spending and the fast-paced evolution of technology has led MasterCard Vice President Judith Dayrit to project that a huge chunk of the Philippine population would be card-equipped by 2030.
“To answer the million-dollar question…technology is moving the milestones in business to move faster. I would think that maybe in 2030, maybe anywhere between 2020 to 2050,” Dayrit told the BusinessMirror.
During the launch of the Platinum MasterCard under Maybank, Dayrit said that, despite the broad spectrum of cardholders from the mass market to the more affluent segments and the strong purchasing power in the Philippine market, rich people continue to be the primary drivers for card usage, mostly driven by travel and overseas spending.
She added that, because of the leniency and ease of traveling around, it’s not only the upscale market that is noticeably using cards for travel but the upper mass market, as well.
Nevertheless, cash remains the primary mode of transaction in the country. Dayrit pointed out that consumers have yet to realize that there is minimal, if not zero, reward at all in the usage of cash and that it remains as the riskiest transaction method.
“We’re trying to move payment solutions so that payment becomes electronic and not manual cash. The main point is how to move from cash transactions to more convenient and easy and reward-filled products like cards,” she said.
Regardless of cash being their preferred mode of payment, Filipinos showed a strong consumer readiness and mobile commerce cluster score in the MasterCard Mobile Payments Readiness index, posting a 34.7 overall score and surpassing the average index score of 33.2.
According to MasterCard, consumers in the Philippines are ready and willing to use mobile payments, especially in the realms of peer to peer and mobile-commerce payments.
However, it also stated that unless laws that relate to business information and communications technology are improved, and banks and mobile networks can cooperate to build mobile payments solutions, the Philippines could see mobile payments become mainstream.
Meanwhile, the Visa Consumer Payment Attitudes Study in 2015 revealed that three of 10 Filipinos have made contactless payments, compared to 21 percent in 2014. Contactless payments include the use of credit card, debit card or smartphone, sweeping aside the need for cash, personal identification number or signatures for transactions under P2,000.
“I can’t really say when majority of the Filipinos will be cardholders. As I’ve said, it’s a steady growth, but not as fast as we like. But we have a lot of room for opportunity with a 57-million possible market,” Visa Country Manager Stuart Tomlinson told the BusinessMirror.
Visa also stated that Filipinos’ awareness for contactless payments has risen from 62 percent in 2014 to 66 percent in 2015. More awareness led to usage, which has grown from 21 percent last year to 29 percent in the said year.
The same study concluded 41 percent of Filipinos recognize new benefits of contactless payments, such as being of less hassle to use, while 36 percent recognized it as being safer.
Data from Euromonitor International showed there are only 7.36 million credit cards in circulation in the Philippines, while there are 35.36 million debit cards.
Euromonitor also took note that Filipino consumers have increased their spending in line with the country’s solid economic performance. Filipinos notably have more money in their pockets and consumers are buying higher-quality essentials—such as food and household products—as well as more big-ticket items, such as passenger vehicles.
“Greater demand for big-ticket items has also been boosted by a wider availability of consumer credit and greater use of financial cards by the growing middle class,” Euromonitor reports stated.
Data from the National Statistical Coordination Board and Maybank ATRKE show that private consumption accounted for 74 percent of the GDP in 2015, with 41 percent of the contribution coming in from food and nonalcoholic beverages, followed by housing, water, electricity, gas and other fuels by a stretch at 11 percent and transport at 9 percent, among others.
Dayrit pointed out that as a card company, they try to work out the needs of the different sectors to be able to cater to more people and uncover their needs to come up with different solutions that will make consumers use the card.
“We have a lot of [partner] banks in the Philippines, but it also depends on the bank having the resources to issue a MasterCard. So in truth, because of the moving economy of the Philippines, the banks are moving to issue cards, as well,” Dayrit said.
She noted that cash is still the main mode of payment in the country, and that’s true for all developing markets around the world. The movement for payment solutions is to convert transactions to electronic and not manual cash.
“As there are many security risks in everything today just like cash is… actually, the riskiest is cash. But as you see that as we move to electronic payments, the technology is trying to move ahead to find advanced and greater security, just as we’ve mentioned moving to EMV [Europay, MasterCard and Visa] chip cards,”
Dayrit said.
Last year the Banko Sentral ng Pilipinas (BSP) has mandated all the banks to comply with the upgrading of automated teller machines compatible with EMV chip-enabled cards.
These cards are the global standards for chip-based credit and debit transactions, and are considered more secure than the magnetic-stripe technology used in most bank-issued cards in the country.
“Definitely, the move everywhere else is to move away from cash,” Dayrit stated.