Hungry? The food will be at your doorstep shortly. Short on supplies? Delivery will be in an hour or so. Need to pay someone? Sure. All of these you can do in the comfort of your home, without the hassle of getting dressed and struggling through traffic, and with your feet up and relaxed all through the “journey.” Just tap away on your mobile phone and your problem is solved.
The health protocols and various lockdown restrictions imposed by the government during the past two years to arrest the spread of the coronavirus pandemic, or COVID-19, have emerged to be a strong catalyst for the wider adoption of digital payments in the country.
When the country was placed under the strictest lockdown measure in March of 2020, Filipinos’ foremost problem was how to get hold of their finances just to buy basic necessities and health products.
The solution? Going digital.
Now, more consumers are becoming digitally-engaged and have adapted the use of digital payments for their financial transactions.
The Bangko Sentral ng Pilipinas (BSP) said that the growth of volume of digital payments has reached 20 percent by end-2020, significantly faster than the 17 percent increase in June of that year.
The value of digital payments likewise substantially grew to 26.8 percent in December, 2020 from 25 percent in the first six months.
By December, 2021, volume of transaction using InstaPay has reached 44.96 million, with value reaching P289.16 billion. A year prior, end-2020, volume was only at 30.61 million amounting to P176.47 billion.
In 2019, volume of transactions using InstaPay only hit 5.76 million, amounting to only P40.10 billion.
For PESONet, volume of transaction as of end-2021 hit 7.01 million amounting to P502.93 billion. In 2020, volume was just at 5.55 million with a value of P366.64 billion.
In December, 2019, two years after InstaPay was launched, volume only reached 5.47 million with a total amount of just a little over P40 billion.
Benjamin Diokno, BSP Governor, said that the increased usage of digital payments was largely driven by “high-frequency, low value retail transactions such as person-to-merchant payments and person-to-person (P2P) payments such as electronic fund transfers.”
“While the COVID-19 pandemic may have disrupted our way of life, it also created exceptional opportunities to boost digital payments and financial inclusion in the country,” Diokno said.
Critical foundation in place
“Even before the pandemic, the BSP was able to lay out the critical foundations to an interoperable National Retail Payment System (NRPS) that allowed payment service providers to innovate and offer responsive digital payment products and services,” Diokno said.
“These have helped ease the burden of Filipinos as they navigate under the New Economy Arrangement,” Diokno said.
The BSP in 2015 launched the NRPS to modernize the country’s retail payments. NRPS is a policy and regulatory framework that aims to set up a “safe, efficient, reliable, and interoperable retail payment system.”
It envisions every Filipino to have easy access to financial services and have accounts to make payments and receive or transfer funds to other accounts anytime, anywhere, at a reasonable price, from any digital device.
The NRPS was also aimed at raising the share of digital payments in the total retail transactions to 20 percent by 2020 from only one percent in terms of volume and eight percent in terms of value in 2013.
A key initiative under NRPS was the rollout of automated clearinghouses, PESONet and lnstaPay, which allows fund transfers among account holders from different banks.
PESONet serves as an electronic alternative to the paper-based check system, while the InstaPay is a real-time electronic fund transfers worth up to P50,000 and is useful for e-commerce.
BSP said electronic fund transfers via PESONet and InstaPay have been surging as Filipinos use digital payment solutions to carry out financial transactions safely amid the health crisis.
“The data are encouraging. These indicate the sustained adoption of digital payments in the country. The preference of consumers for safety in their financial transactions, coupled with the readiness of the BSP-supervised financial institutions to offer digital payment choices that are safe, convenient, and affordable will continue to support the widespread use of digital payments,” Diokno said.
The Bangko Sentral ng Pilipinas (BSP) said that the growth of volume of digital payments has reached 20 percent by end-2020, significantly faster than the 17 percent increase in June of that year. The value of digital payments likewise substantially grew to 26.8 percent in December, 2020 from 25 percent in the first six months.
Payments by individuals up
BSP’s 2020 e-payments measurement results show that P2X or payments by individuals continue to account for a significant share of the recorded 2020 4.5 billion monthly payments volume at 78.1 percent, followed by B2X or business payments at 21.2 percent and lastly, G2X or payments by the government at 0.7 percent.
“In keeping with our commitment to inclusive growth, we shall continue with our goal in providing universal access to safe, affordable and convenient digital payments and financial services to every Filipino,” Diokno said.
The growth in the monthly digital payments volume is primarily driven by high-frequency, low-value retail transactions made by individuals such as merchant payments and person-to-person (P2P) payments.
P2X monthly digital payments volume has significantly increased from 15.3 percent in 2019 to 23.4 percent in 2020.
“While government payments, or G2X, is just a small fraction of the total monthly retail payments volume, it remains to be the most cash-lite among payers with 93.2 percent of its total monthly retail payments volume already in digital form. The monthly volume of government digital payments improved by 17.2 percent, indicating that the digitalization efforts of the government are paying off,” the BSP report said.
Meanwhile, the payments made by businesses, orB2X, appeared to have been the most affected by the pandemic as the BSP saw a decline in the total number of payments made by businesses in 2020.
B2X payments volume dropped by 19.8 percent from 65 million in 2019 to 52 million monthly digital payments in 2020.
Supplier payments, making up 88.2 percent of the B2X payments, have less than one percent of monthly retail payments volume in digital form.
Government payments remain the most cash-lite in 2020, with monthly digital payments value at 82.8 percent ($7.5 billion), followed by payments made by individual consumers, or P2X, with 44.1 percent ($15.4 billion), and payments made by businesses, or B2X, with 12.8 percent ($10.1 billion).
Nearly all payments by individual consumers were made to merchants and this payments use-case continue to have the largest share among all P2X use-cases in 2020 — merchant payments account for 3.2 billion total monthly retail payments, of which about 773 million are digital.
The increase in P2P payments was completely driven by remittances — out of the 157 million transactions made by individuals every month, valued at $9.2 billion, 27.0 percent represents digital remittances.
P2P payments continue to be one of the primary drivers of the country’s digital payments transformation.
‘While the COVID-19 pandemic may have disrupted our way of life, it also created exceptional opportunities to boost digital payments and financial inclusion in the country.’ — BSP Governor Benjamin Diokno
The QR Code
Late last year, the Bangko Sentral ng Pilipinas (BSP) launched the QR Ph Person-to-Merchant (P2M) payment facility.
A QR code, or quick response code, is a hybrid barcode than can hold information both horizontally and vertically.
Diokno stressed that payments are made secure via QR code as transferred data is encrypted.
He stressed that the QR Ph P2M is a safe, convenient, and affordable option that allows customers to pay for goods and services without paying transaction fees. Payments of customers are received by store owners in real-time as QR Ph P2M runs via InstaPay, which is available 24/7.
“Both merchants and customers can be assured that when the customer scans the merchant’s QR code, the payment is sent to the correct account number of the merchant.
This simple process of scanning eliminates possible errors when doing manual input of account details,” Diokno said.
Consumers only need their mobile phones and need not carry cash or debit or credit cards.
Merchants, on the other hand, must only print the QR code that their payment service providers will generate for them, display those codes, and obtain payments by simply asking their customers to scan the codes.
“There are no fees charged to customers making payments to merchants using QR Ph P2M.
This feature makes using digital channels reasonable even for small-value transactions, such as jeepney or tricycle fares, or payment of goods from market vendors or sari-sari store owners,” Diokno added.
QR Ph P2M is supported by the national QR code standard, which is aligned with the global standards of Europay-Mastercard VISA Co (EMVCo).
“QR Ph P2M provides an easy-to-use and convenient option for customers and a low-cost digital payment solution to businesses. It can serve as a digital gateway for micro-merchants, allowing them to sustain their operations under the post-COVID economy by offering a safe and secure payment options,” explained Governor Diokno.
Merchants interested to offer QR Ph P2M as a payment option need to engage with their bank or e-money issuer to know their respective payment service provider’s requirements.
Once merchants have been provided with a QR code by their payment service providers, they can start accepting payments from customers through QR Ph P2M.
“We are confident that QR Ph P2M will spur the accelerated usage of digital payments in the country, allowing even more Filipinos to enjoy the benefits of going digital,” Diokno said.
According to the latest report of the BSP on the status of digital payments in the Philippines for 2020, over 70 percent of retail payments in the Philippines are made to merchants, majority of which are MSMEs, but only a quarter of these payments are made digitally.
Diokno said onboarding more merchants to accept digital modes of payment via QR Ph P2M will significantly increase the share of digital payments and encourage more consumers to enjoy the full benefits of digitalization.
Later on, QR Ph P2M may also be used for bills payment.
Tech-savvy economy
Diokno stressed that the BSP remains at the forefront of broad initiatives to foster a stronger and more technologically-advanced Philippine economy.
“Technology aids exponential growth in output. In finance, it makes transactions easier and faster which speeds up income generation,” Diokno said.
A key BSP initiative in this regard is the implementation of the Digital Payment Transformation Roadmap, which was launched in 2020.
The roadmap aims to transform the Philippines into a cash-lite economy by 2023 through digitalization of financial services.
Under the roadmap, the BSP aims to strengthen customer preference for digital payments by converting 50 percent of the total volume of retail payments into digital form and onboarding 70 percent of Filipino adults to the formal financial system through payment or transaction accounts by 2023.
But with the success of the NRPS, Diokno said that at least half of the total retail transactions will be online by the end of this year, a year earlier than the three-year Digital Payments Transformation Roadmap target.
“The BSP also actively promotes digital banking and has recently issued six digital bank licenses. This is expected to further accelerate the creation of e-money accounts,” Diokno said.
A digital bank is a bank that offers financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical; -branch/sub-branch or branch-lite unit offering the same.
“We expect digital banks to help fuel recovery and long-term growth for the Philippines, alongside conventional banks,” he said.
“The Philippines does not simply aim to recover from the crisis. There is a whole-of-government effort toward a post-COVID Philippine economy that is better than ever. This means an economy that is stronger, more technologically advanced, more inclusive, and sustainable.”
