Infrastructure, connectivity issues impeding PHL e-payments growth

DIGITAL PAYMENTS remain pivotal in financial inclusion, industry players said, as physical and cultural issues are seen to be key barriers in serving the unbanked sector.

In “The Future of Finance Philippines” conference held by The Asian Banker on Friday, key figures in the banking industry emphasized the value of harnessing digital payments in the Philippines where infrastructure and connectivity problems continue to hamper growth.

Mamerto Tongonan, USAID/E-PESO Activity’s Chief of Party said digital payments are “important” as they promote financial inclusion.

“Digital payments reduce the cost of providing financial services by 80-90%. That makes it cheaper for customers to for accepting cash deposits and withdrawals as well as enabling customers to move money from their account to another,” Mr. Tongonan said in the forum held in Makati City, adding that electronic means of sending money can also boost economic growth and improve the quality of life.

Despite its potential to boost economic development and bringing the unbanked into the formal financial system, Mr. Tongonan noted that e-payments usage in the Philippines remains low.

“To appreciate the seriousness of this problem, we are at the bottom of our ASEAN peers, lagging behind Vietnam in terms of the number of digital payments users.”

Several panelists noted cultural and physical barriers to embracing e-payments in the country, which include the functionality of bank accounts and complexity in opening such.

Joyce L. Suficiencia, acting deputy director of the Bangko Sentral ng Pilipinas’ (BSP) Inclusive Finance Advocacy Office, noted that transaction accounts are only viewed as a storage for money.

“Payment is a basic and the most used financial service in the country by Filipinos, and yet it is still primarily an over-the-counter and cash-based transaction, undermining its potential to be a gateway to financial inclusion,” she said.

Aside from this, Asian Development Bank Principal Economist Jong Woo Kang said opening a bank account is also a problem.

“A lot of people do not want to open an account in financial institutions because there are cumbersome documentary requirements and identification verification procedure. There is also some physical distance to the branches of the banks or [automated teller machines],” he said.

To address these barriers, BSP’s Ms. Suficiencia said the government must solve infrastructure issues in the country while financial institutions must introduce more compelling uses of owning a transaction account.

“We don’t only need to address operational barriers to opening an account like the lack of documents and funds, but we also need to ensure that an account can have practical use for the unbanked beyond being a storage of value,” she said.

“Our goal is to democratize access to transaction accounts and to make it useful not only as a [storage] of money but also as a convenient and affordable [tool] to make and receive payments.”

Aside from this, panelists noted that channelling wages, paying for utilities and government services, as well as transferring funds to another account through digital platforms may also be valuable ways to use bank accounts.

“If transferring money across platforms will be made easier and affordable, we can expect digital payments to fly,” Antonio Owen S. Maramag, senior vice-president at the Development Bank of the Philippines, said.

The Bangko Sentral ng Pilipinas launched the National Retail Payments System framework in 2015 with the objective of promoting a “cash-lite” economy wherein financial transactions will veer away from cash and check and toward electronic fund transfers and digital wallets.

The BSP targets to raise the share of digital payments to 20% of total transactions by 2020 from a measly one percent in 2013. —