Visa Inc. is looking at increasing its presence in the Philippines’ unbanked sector by offering new and affordable means of cashless transactions, seen to boost the economy.
“We think electronic payments is good for the economy. It’s good for people. If you bring it down for the people, it’s great because it’s convenient, it’s more secure and it’s a great way to manage your budget,” Visa Country Manager for the Philippines and Guam Stuart Tomlinson told BusinessWorld in an interview.
According to Mr. Tomlinson, the country’s personal consumption expenditure (PCE), which measures the price changes of consumer goods and services, is around 8%.
“And that’s not just Visa’s share of that, it’s every dollar spent in a discretionary form in the Philippines. About 8% of it is electronic and that could be on any of the international schemes or on the local payments,” he explained.
Citing Bangko Sentral ng Pilipinas (BSP) data, electronic payment transactions here in the country makes up 1% of total transactions.
“So we look at volume, the BSP look at transactions, and either way, that’s not a great place to be. It’s too low… If you look at that sort of baseline, it’s too low,” Mr. Tomlinson said.
“What the industry and what the central bank is doing is working very hard to try to increase that penetration, because we all know that if we have electronic payments, it’s a much more transparent way for people to do business,” he noted.
According to Mr. Tomlinson, there has to be a change in the behavior of the mass market for more Filipinos in that sector to gain trust in electronic payments and the financial technology industry.
“If we think about a country like the Philippines we’ve got hundreds and millions of small businesses…so we’re sort of developing innovative ways to try and make cost of acceptance much lower for both the bank and the merchant. So basically, on our innovation front, we’re turning the cellphone into an acceptance device,” he said.
“When you get down to that sort of mass market, they want ease and convenience so we try to build innovative use cases around using the mobile phone for electronic payments… We’re working on this with the central bank, we’re working on this with our clients — which are the banks and the telcos — tempering new and innovative technologies to make them cheaper, easier and more convenient for the consumer, for the infra[structure] plans, which are the banks, and for us, Visa, because we’re the network so we can help sort of promote the thinking, innovation and technology,” Mr. Tomlinson said.
Asked if the company is bullish on increasing its penetration in the country, Mr. Tomlinson said, “Yes, very bullish. We’re bullish because the numbers are low…but we really believe that what the central bank is doing with all of it’s…ruling around the [electronic] KYC process, they’re trying to make it easier for people to [go cashless].”
The KYC or “know-your-customer” rule requires financial institutions to establish the full identity of individuals looking to transact with them, which is usually done by requiring identification cards from a client. It also involves monitoring account activity in keeping with operational risk management and combatting dirty money transactions.
E-KYC procedures allow financial firms to use online channels like video calls and geocoding to verify a client’s identity.
Visa had said last year that card usage in the Philippines continued to expand in 2015, with the use of its premium cards driving electronic payments in the country that accounted for 46% of total payment volume during the year, despite accounting for only 22% of total active cards in the local market.
Card penetration in the Philippines was at 11.4% in 2015 from 9.2% in 2010. Cash still accounts for bulk of transactions at 82.3%, although down from five year’s ago rate of 84.4% while bank transfer, direct debit and checks stood at 6.3%, also declining from 2010’s 9.2%.
The largest part of the pie of affluent spending came from retail at 18.70%, travel at 18.66%, supermarkets at 13.8%, restaurants at 6.8% and fuel at 4.68%.