Industry leaders see electronic-payment systems as one of the lead channels under which financial inclusion may be promoted across the 7,107-island strong archipelago.
At the joint Oxfam-Visa case study on Innovative Electronic Cash Transfer Program for Emergencies, Visa Philippines and Guam Country Manager Stuart Tomlinson said upside opportunities exist for technology that brings access to financial products for countries like the Philippines with a large archipelagic geographical setup.
Together with international humanitarian aid organization Oxfam, the globally recognized payments firm Visa rolled out a prepaid-card format solution designed for a wide range of use, including withdrawal from automated teller machinces (ATMs) and partner remittance centers and over-the-counter purchases under a joint Electronic Prepaid Solution (EPS) Project targeted at Supertyphoon Yolanda and Ruby victims.
“The inclusion starts at getting the card and using it as an ATM and using it at merchants. But the real Holy Grail from that is already the saving. Saving for the next disaster,” Tomlinson said.
Since its distribution in 2015, the EPS has reached 10,252 individuals, the majority being typhoon victims. The card has no maintaining balance and serves as a “saving facility” without pressing documentation requirements needed in most other bank accounts and reloadable through partner retail outlets that also serve as cash-out agents.
“Our policies for electronic payments are what enabled this kind of payments to be rolled out into the public. We will continue that to see our policies transform depending on the market needs,” said Bangko Sentral ng Pilipinas (BSP) head of Inclusive Finance Advocacy Staff Pia Roman-Tayag said.
“We made certain exemptions for the KYC [know-your-customer] [policies]. Presenting an ID, providing information…we need to dispense those, knowing the case of Yolanda victims. What we need to know is that these policies are institutionalized and we are prepared the next time it happens,” she explained.
The project received positive remarks from beneficiaries, as it provided a safer and more secure transaction method, compared to using cold, hard cash, especially in a hostile environment, where looting activities were at a record high after the supertyphoon hit Eastern Visayas.
According to the World Bank, only 31 percent of Filipino adults have bank accounts. As the BSP conducted its own survey, the regulator discovered that around 40 percent of Filipinos save and that more than 65 percent shelve their savings at home.
“Also, more than 40 percent of Filipinos borrow but almost 70 percent borrow from informal services so we say that they are excluded from formal financial institutions that can provide them services that are regulated, protected and informed. Definitely there has been a big gap,” Tayag said.
Over 2.5 billion payments are made every month, but only one percent of those transactions are made electronically.
“As we bring people into the system, we lay the foundation for a deeper financial relationship. So when you go from prepaid, then you go to a CASA account, so you have your own stored wealth. Then you move from savings to credit, you have access to credit,” Tomlinson said.
“Access to credit is important because it helps stimulate growth in the economy. It [also] helps the financially secluded entrepreneurs to set up their businesses.”
The Visa executive said financial literacy should be a priority among the 70-percent unbanked Filipino population to fill the so-called gap for financial inclusion in which “education and awareness becomes of vital importance.’’
There is also a challenge to bring the most accessible and cost-efficient products in the market wherein Visa is looking to grow both debit- and credit-card usage with the help of financial institutions in the country.
“Their job is to create an environment where the participants bring in the most efficient, robust and affordable payment system to the Philippines,” Tomlinson said.
Tayag said Filipinos could optimize the payments where they could get more value added to their transactions, particularly electronic transactions.
What better way to promote financial literacy and inclusion than through mobile phones?
Data from research firm International Data Corp. (IDC) show 3.5 million smartphones were shipped to the Philippines in the first quarter of 2016. This drove the smartphone market 20 percent higher year-on-year, making the country the fastest-growing smartphone market in Southeast Asia.
Tomlinson said the reality is that commerce is moving to the mobile-phone medium, along with the rise of the development of financial technologies that provide accessible interface through smart phone applications.
The executive said Visa is keeping up with the movement by building technologies to secure payments within the mobile phone, seeing this trend as an opportunity to expand their services.
“We are constantly investing in technology that will make sure transaction payments is safe, secure and well-protected, that’s our approach.
We make sure that all channels are sustainable by making sure it’s safe and secure and card holder information are protected,” Tomlinson said.
