‘CASH is king” as the old adage goes. But ask anyone from MasterCard and they’ll quickly say that war has been waged against the “king.”

“One of the key imperatives for us is the war on cash,” says Matthew Driver, MasterCard’s Southeast Asia president, during his visit to the Philippines last week.

Cash, he says, is a four-letter word that is expensive to produce, transport, store, and there is a huge risk of pilferage in the system.

The use of cash, he adds, is relatively inefficient compared with the electronic means of payment. It also costs institutions money if it holds on to it very long as it doesn’t earn interest when just kept in the vaults.

Driver oversees the company’s market in the region, including Singapore, Malaysia, Thailand, the Philippines, Indonesia and Indochina.

The battle against cash, however, will be long and arduous, and offering a new product as another form of payment is like repeating a marketing strategy that the company used 20 years ago all over again, MasterCard officials admit.

Credit cards or plastic money arrived in the Philippines as early as the 1980s, as there were products before that were exclusive for restaurants such as the Diners card. Since the introduction of plastic money in the Philippines, however, credit-card usage remained low, with 90 percent or more still prefering to use cash on their purchases.

Jose Rene Villa-Real, MasterCard Philippines country head, says the challenge for the credit-card company was to convince everyone in the value chain to see some of the positive things of using electronic money rather than cash.

Even in the mature markets such as the United States, where most of the population have credit cards and around 50 percent of the transactions were made electronically, many still prefer cash, he says.

“It’s either you get incremental revenue out of it or you reduce the expense of somebody using cash,” Villa-Real says.

He cites the Philippine government as an example, wherein President Aquino vowed to stamp out corruption during his term.

“In truth cash is the friend of corruption. The moment you tried to put as much of that [cash transaction] in electronic form, then you’re effectively creating a paper trail,” he says.

“The government should see that [using electronic form of payment transaction] as a positive thing even if it’s not really translating into positive revenue,” he adds.

At the moment, most of the government transactions are still on cash basis, and even big companies such as mining firms prefer remitting their payments to the Bureau of Internal Revenue through cash.

Since the previous administration, the Bureau of Customs has an initiative called electronic to mobile system to automate all of its processes, forcing all of its importers to pay through banks and minimize the contacts with the Customs personnel.

 

WikiLeaks issue

Still, credit-card companies are hounded by several issues overseas, which could affect their popularity in developing countries like the Philippines.

For one, MasterCard, originally known as MasterCharge, and even its counterpart Visa, have recently been criticized by European markets for blocking payments to WikiLeaks and its founder Julian Assange.

WikiLeaks made several revelations recently, which include allegations that US authorities have lobbied Russia to defend the interest of American credit-card companies MasterCard and Visa. Russia was reportedly creating a national payment card that would handle all transactions in the country and restrict the sending of data abroad for all transactions made in Russia.

But according to MasterCard, there should be enough belief in the system from the end users for it to work, despite all the issues at hand.

“We will not take value from one thing to another. That will never work. It should complement with each other and the people [or end users] should have the belief in us,” Villa-Real says.

 

Contactless payment

Since 2003, credit-card companies have been testing their system interoperability. Field tests in the region are now being conducted for a “contactless” payment, or paying the purchases by just tapping the card or a mobile phone into another device. This technology is already being used in the Philippines, such as on toll roads for the cars and buses, and on the elevated railway transport like the MRT, and even for gaining entry to the premises of a company for employees and other visitors.

MasterCard recently provided Barclaycard and Orange mobile-phone users to make contactless mobile payments in the United Kingdom and it will be a matter of time when the said technology is introduced in the Philippines, the officials said.

“But the challenge is that people should see that [using the payment] technology on their own volition. You cannot sit down with someone and for 10 hours lecture him with NFC [or Near-Field Communication] and he’s already convinced. That will never work,” Villa-Real said. NFC is the technology behind the contactless transaction.

He admits that credit-card companies will again have a tough time marketing this new payment technology to end users with the hope of taking cash out of the system. It will be the same marketing plan all over again.

“We’re going to that path and we have to find value for everybody,” Villa-Real says.

As for the war it’s waging, even MasterCard officials admit, the king is still winning.