PHL journey to digital transactions needs faster vehicles

THE Philippines is well on its way to be a cashless nation, results of a survey claims. Findings from the PayPal study titled “Digital Payments: Thinking beyond Transactions” revealed about 175 of 700 Philippines-based people polled (25 percent) said that traditional (physical credit card, bank transfer/Internet banking, checks, etc.) and new methods are now their primary options of payment. “In fact, one-third of consumer respondents in the Philippines have already starting transacting without cash,” the survey said.

“Transparent tracking of money flow, improved transaction efficiencies, unlocking new business models and the creation of more economic channels are just a few ways digital payments drive economic opportunity for both consumers and businesses,” Rahul Shinghal, PayPal’s general manager for Southeast Asia, said.

Shinghal believes that opportunity is specifically present among millennial consumers and small businesses.

Small biz

SMALL businesses lay claim to half of the world’s GDP and have a huge impact on sustainable economic growth, according to Shinghal.

Citing an article from the university press affiliated with the Massachusetts Institute of Technology (MIT), Shinghal said these small businesses collectively employ two-thirds of the global workforce, forming the bedrock of any burgeoning economy.

“Perhaps most ironically, their meteoric rise is the single most compelling threat to big multinational corporations these days,” he wrote for the BusinessMirror. “In Southeast Asia, one of the most entrepreneurial regions in the world and the fastest growing regional economy in the next century, we are also seeing a rise in small businesses and some 3.5 million self-employed.”

According to Shinghal, PayPal is currently seeing a rise in the number of Filipinos starting their own businesses or embarking on freelancing work.

“One of the main catalysts that have led to the rise of small businesses in this part of the world is the rapid proliferation of fintech [financial technology] that helps entrepreneurs to simplify and negate complex financial services in their pursuits of their business goals,” Shinghal said. “This is especially so for a market like the Philippines, where almost half of the country’s workforce are millennials.”


ONE of these fintechs is Mynt, a subsidiary of Globe Telecom Inc.

Albert Tinio, president of GCash, the micropayment service company of Mynt, believes that ordinary Filipinos can now avail themselves of affordable financial products and services like mobile banking, remittance, insurance, loans and credit as the use of technology and innovation continues to be more pervasive in the Philippines.

“There is really a dire need for financial inclusion in the country since many Filipinos still do not have bank accounts as well as access to formal lending and credit,” Tinio said. “But due to fintech innovations, even those in remote areas can already take advantage of a wide range of financial services available in the market today.”

According to Tinio, about 70 percent of Filipinos do not have bank accounts or any formal means to save money, while 90 percent of Filipinos do not have a credit score, making it difficult for them to secure a loan. It also forces some individuals to turn to informal lenders which charge interest rates of as high as 20 percent, he added.

Moreover, 40 percent of cities and municipalities do not have physical banks, thus, residents have to spend a lot of time, effort and money to get to the nearest bank, Tinio explained.


ACCORDING to PayPal, digital payments offer not just convenience and a more secure way to pay, but also provides consumers with more options.

Most of the respondents (74 percent) in their research cited convenience as a reason to use digital payments. Another 57 percent said it was because of the lower processing and transaction fees they received when using digital payments.

“Interestingly, 27 percent of respondents prefer new payment options because of the increased amount of promotions they received as compared to 23 percent who use traditional methods and 12 percent who use cash.”

The study also revealed that digital payments have provided consumers with the tools to better manage their finances, particularly one of the most challenging financial issues faced by consumers: bill payments. Among those surveyed, 54 percent of consumers who rely on cash have difficulties managing their bills and credit payments compared to a smaller proportion (29 percent) of digital payments users. The ability to track payments, pay instantly, and the choice of payment methods can be a boon to managing consumers’ cash flow and their financial health.


ACCORDING to Shinghal, the adoption of digital payments is led by young Filipinos or millennials.

“Being digital natives, they are more open to leveraging new technologies to help them pursue their business goals,” he said. “Where businesses used to turn to their local bank for their transactions, technology has introduced various different options to help them to sell to the global economy safely and securely.”

Shinghal cited as example the provision of hosted platforms such as Shopify and Shopee. These platforms, according to him, have allowed many small- and medium-sized businesses to set up shop and secure customers easily and cost-effectively.

“It is a timely stage of transformation in the way we do business. Coupled with the ‘always online’ culture in a mobile-first Philippines, there are plenty of new opportunities for consumers and merchants alike in the market,” Shinghal said. “With access to sophisticated fintech analytics tools that were only available to large businesses previously, a nimble smaller business can learn more about its customers’ purchasing patterns and get creative in the way it sells online to appeal to these consumers.”


ACCORDING to PayPal, digital payments also offer a transformational solution for merchants because they increase convenience for consumers.

“Additionally, merchants are able to reap large efficiency gains transitioning from cash to digital payments and moving away from manual to electronic financial tracking,” the PayPal report said. “The benefits to business owners range from reduced operational costs, convenience of transactions to allowing new business models, such as social commerce or ‘s-commerce,’ to solidify.”

According to Shinghal, merchants are also no longer limited by the people around them or their local infrastructure or business environment.

“In fact, they have the entire population of the connected world at their fingertips. People with big ideas and good products can offer them directly to the world, and the smallest companies can seek customers in the farthest markets.”

He said that over 70 percent of PayPal’s 16 million merchants, most of which are small businesses, have made use of increased connectivity to do business cross-border. Shinghal said the people behind these businesses operate “without worrying about the high transaction fees and compromised security.”


WITH social media moving beyond a networking platform to a digital marketplace, the adoption of digital payments is further boosted with its ability to offer seamless payments between merchants and consumers, the PayPal survey revealed. Among merchant respondents in the Philippines, 88 percent have turned to selling on social media.

“The growing trend of s-commerce, of which digital payments is a key transaction method, has been shown to have positive effects on merchants’ financial health,” the report said. “A substantial 96 percent of s-commerce respondents said it has improved their financial condition, and 88 percent mentioned that it helped grow their business.”

For the Philippines, s-commerce is a viable opportunity for the significant rural population to tap into as a means to improve their economic well-being.


THE positive impact that digital payments can have on the welfare of individuals and businesses is significant, but the ripple effect on the economy is even more promising, PayPal said. Such is the case with online freelancers or social entrepreneurs.

Financially healthy individuals spend their money at local businesses and start companies of their own, the company said. Financially healthy businesses create jobs that pay good wages and support the economic development of communities.

“Technology innovations have forever changed business models,” Shinghal said. “There is now a world of possibilities for businesses to offer more services to a global audience of shoppers who are ready to buy online, at a fraction of the price of what it would have cost before, and to work closely with each other.”

He added that technology innovations have allowed small businesses “to offer a differentiated business model, deliver an enhanced, personalized customer experience and tap into the power of digital to ensure end-to-end business value.”

“It has never been cheaper to not only set up your business, but also expand it, while gaining access to partners and insights on consumers from around the world.”


PAYPAL has cited what it calls “great strides” that the Philippine government makes in rallying Filipinos to adopt digital payments. These strides include the launch of the National Retail Payments System (NRPS) Framework, which seeks to create a reliable electronic payment system between banks and e-money accounts.

Still, PayPal said the country is only scratching the surface of what it could be.

Industry players and government regulators within the payment ecosystem need to collaborate to further drive adoption of digital payments and unlock the full potential of this new payment method, according to PayPal.

“The role of digital payments is rapidly evolving. More than just a mode of transaction between sellers and buyers, digital payments has become the platform for its users to achieve better financial well-being and greater economic opportunity,” Shinghal said. “At PayPal, we work hard to understand the needs of consumers and businesses so as to ensure that the products and services we bring to market will improve their financial transacting experience and their financial health. Our collaborations with GCash and PayMaya are examples of how we have worked together with local providers to help Filipino freelancers and MSMEs move and manage their money in a more convenient and seamless manner.”


ANOTHER firm active in the fintech space in partnership with the Philippine government is FINTQnologies Corp. (FINTQ), the fintech arm of PLDT Inc. and Smart’s Voyager Innovations Inc.

FINTQ said it is targeting to enable 30 million Filipinos to be financially included by 2020 through a collaboration with the Liga ng mga Barangay (Liga), the association of local government units with the largest membership representing barangays nationwide.

The initiative is part of KasamaKA, the first-of-its-kind program that aims to accelerate financial inclusion in the Philippines. It combines financial literacy with an income opportunity builder that rewards responsible usage of digital financial services such as digital microsavings, lending, micro insurance, micro investments, payments and lay-away, among others. The initiative was launched in September at the Bangko Sentral ng Pilipinas headquarters.

FINTQ’s collaboration with Liga aims to expand its community livelihood and entrepreneurship initiatives through its existing and new educational programs. The partnership is a massive and sustained implementation to create millions of income opportunity builders.

Barangay constituents, particularly the likes of ambulant vendors, farmers and self-employed workers who remain financially excluded, can learn more about available, accessible and affordable financial services. At the same time, they can also earn up to P300 additional income every time they use a service or successfully refer a relative, a friend or their regular customer.


“BEING able to go down to the barangay level to enable access to financial services is people empowerment at its finest,” Lito Villanueva, managing director of FINTQ, was quoted in a statement as saying. “This is our commitment to promote bottom-up inclusive growth initiatives that would address poverty.”

According to Villanueva, they estimate that 69 percent of the population are unbanked and underserved.

“Engaging and enabling them to have credit footprint will surely unlock economic opportunities leading to much better lives,” he said. “With the increase of self-rated poor in the third quarter of this year based on the latest Social Weather Stations survey, there is a need to have targeted, impactful and sustained public-private sector interventions.”

KasamaKA, Villanueva said, is one of them.

According to FINTQ, among the initial incentivized digital financial services currently included in the KasamaKA program are any digital loan from over 70 partner banks and institutions in the Lendr platform. To be also included would be digital payment transactions from eMoney wallet PayMaya.

In his speech before some 1,500 local government officials who attended the recent 5th Regional Competitiveness Summit in September, Tinio said that being a subsidiary of Globe allowed Mynt to help address the concern by building a financially inclusive ecosystem.

“Since telecommunications companies are in a unique position to penetrate even far-flung areas through mobile services, Mynt was able to leverage on the capability and infrastructure of Globe to offer fintech to anyone, anytime and anywhere,” he said.


GLOBE Telecom said it is also aggressively working with LGUs.

The company recently partnered with Makati City for the “Makatizen Card,” as well as with Davao del Norte for a similar citizen ID system. According to Globe Telecom, both projects provided the opportunity for the creation of a cashless ecosystem for payment needs and eliminate the old practice of face-to-face transactions and even old policies in disbursing allowances, wages, stipends and others. The citizen ID card functions as a valid government-issued ID card and can be used to avail themselves of various social services, transact with government and purchase goods and services.

Fuse, another subsidiary of Mynt, meanwhile, can be used by individuals and micro/small businesses to secure a loan.

“Our loans platform, through Fuse, creates credit scores for Filipinos using telco data, where the profile of a loan applicant can be determined to know if the person has the ability to pay for a loan,” Tinio said. He recalled that the first loan applicant was a fruit vendor in Cagayan de Oro City a year ago. Her loan application was approved in as fast as 24 hours, he said.

Another layer in the Mynt financial platform hierarchy is the ability to give out insurance plans, with the support of expert insurance partners.

“We want to create a marketplace for insurance that’s customized for Filipinos and paid through reasonable and fair premiums,” Tinio said. “Filipinos with some savings can invest it through Mynt using a platform that gives them the ability to do that in the easiest, most convenient and safest manner.”

In order to cater to the financially underserved, Mynt and Globe Telecom partnered with Ayala Corp. and mobile payment services firm Ant Financial to build platforms built for scale.

“Ant Financial already has more than 450 million users, while ours is only at 4.7 million. Our dream is to become as big as that,” he said.


THE rapid adoption of digital technologies among the population and the rise of fintech players are accelerating financial inclusion.

However, the opportunities to bridge the digital financial access divide remain huge. Data from the World Bank reveals there are still 69 percent of Filipinos aged 15 and above who do not have a bank account.

A big challenge is uneven access to services. Banks are non-existent in 36 percent of cities and towns. As per BSP data, around 57 percent of banks are located in the National Capital Region, Calabarzon and Central Luzon.

“Financial inclusion is definitely part of our capacity-building measures,” LNMB National President Edmund Abesamis was quoted in a statement as saying.

Abesamis believes the answer here is KasamaKA.

“Being at the grassroots, KasamaKA is an enabler so our over 42,000 barangays can be empowered to have greater awareness and access to inclusive digital financial services,” he said. “As a national movement for inclusive growth, it will surely have a ripple effect on economic growth and development.”

According to FINTQ, the KasamaKA initiative supports the government’s NRPS and National Strategy for Financial Inclusion.

It addresses the challenge of providing strong incentives for the unbanked and underserved consumers to try to access financial services, FINTQ said. At the same time, it also opens opportunities to banks and other financial institutions to expand their offerings to serve these segments, the company added.


SHINGHAL believes “this is the greatest time to be an entrepreneur.”

This is true, he said, especially when agile and relevant solutions can help passionate entrepreneurs live their dreams.

However, he said there is a need for entrepreneurs to undertake partnerships and knowledge-sharing.

“We are not going to find a single solution that will remedy all consumer needs, but working together with partners, even if some may seem counterintuitive at first glance, can help us extend the value of our businesses and drive impact at a greater scale,” he said. “They can also work with a diverse set of mentors or industry veterans that can help clarify the next steps, set the right goals and perfect a plan.”

While technology has presented many opportunities, the speed of innovation and reinvention also means greater competition for our small businesses, Shinghal added.

“Their ability to cope with a shortened feedback loop as a result of greater connectivity determines their success and, by association, failure, quicker as well.”

Shinghal also believes that for small businesses in the Philippines and Southeast Asia to succeed, “it is pertinent for entrepreneurs to be more savvy and discerning of changes in the industry to cash in on market opportunities.”

“And this means data is now all the more important. In a time where markets are saturated with new ideas and competition, businesses that are able to keep their ears on the ground and leverage relevant data to customize customer experiences will thrive.”

Nonetheless, Shinghal remains optimistic and gives this challenge to consumers and entrepreneurs in the Philippines now on the journey to digital payments: “Let’s set our small businesses on the route to success, because the best is yet to be.”


Image credits: Mcpics | Dreamstime


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