Towards a cashless society
“Pre-COVID-19, cash was king. Today in the new normal, cashless is emerging as the preferred option. Cashless and contactless technologies help promote physical distancing and touch-free transactions while allowing for social government services to be delivered in an efficient and transparent way, resulting in the ease of doing business.”
PRIOR TO the pandemic, financial technology was one of the sectors that were seeing the biggest changes, a hotspot of innovation and entrepreneurship.
During that time, the Philippines had the opportunity to be a leader in the digital world due to a growing digital-savvy generation, an expanding middle class, worldleading mobile and Internet usage, and an enterprising startup culture.
When the pandemic struck, much of that potential remains. In fact, many experts agree that digitalization in the country has been accelerated due to the quarantine. The government and the private sector are one in recognizing the need for digitized solutions for Filipinos’ financial needs, and in no area is this clearer than in the proliferation of cashless platforms like GCash and PayMaya.
“The past few months h ave br oug ht to fore how dig it a l technologies can help governments in the interrupted delivery of essential services and the faster disbursement of financial aid,” Orlando B. Vea, founder and chief executive officer of PayMaya, had said in an online forum conducted by BusinessWorld.
“Pre- COVID-19, cash was king. Today in the new normal, cashless is emerging as the preferred option. Cashless and contactless technologies help promote physical distancing and touch-free transactions while allowing for social government services to be delivered in an efficient and transparent way, resulting in the ease of doing business,” Mr. Vea added.
Indeed, agencies such as the Social Security System, Bureau of Internal Revenue, and even local government units from cities like Valenzuela, Manila, and Mandaluyong are working with PayMaya to facilitate and accept digital transactions in this ‘ new normal’.
Using digital payment platforms, the need to personally go to city hall to file applications, pay bills, and other fees is eliminated, making local government spaces safer and more secure from the virus. Through digitized systems, LGUs can also become more efficient and future-proof, as certain logistical hurdles, such as bookkeeping, documentation, and other matters become trivialized.
The Bangko Sentral ng Pilipinas (BSP) had even encouraged the use of digital payment services in light of the pandemic, as physical transfers of cash carry the unnecessary risk of transmitting the coronavirus.
“We also encourage the use of e- banking and digital payment services as this enables the public to carry out needed financial transactions safely amid this public health crisis,” the BSP had said in an announcement.
Last but not least, cashless platforms also introduce more accessible financial services to unserved and underserved areas of the Philippines. According to the BSP’s Financial Inclusion Survey 2017( FIS), only 23% of Filipino adults have a formal bank account. Only 48% of adults save, but seven in 10 savers keep their savings at home. Of the 22% of Filipino adults who avail loans, 4 in 10 do so through informal sources.
The Better Than Cash Alliance — a UN-based global partnership suppor ted by governments, nonprofits, and the private sector — further found that as two out of three Filipinos are financially excluded from traditional financial systems, they also have limited capabilities in owning a digital wallet or account. This is despite the fact that digital payments has increased to 10% of the country’s total transaction volume, corresponding to 20% share in the total transaction value.
With platforms like GCash and PayMaya, any Filipino family with access to a smartphone and the Internet can avail themselves of financial services, making financial inclusion more achievable.
In previous repor t s, BSP Governor Benjamin E. Diokno had cited findings from a separate Better Than Cash Alliance report, showing that the use of electronic payment methods in the Philippines had grown from just one percent of all transactions in 2013 to 10% in 2018.
Mr. Diokno said that “significant progress is attainable through effective cooperation” toward achieving a “cash-lite economy.” The use of electronic systems for payments and other transactions normally done in cash has “the immense potential to foster financial inclusion”, he added.
The governor also said that steps were being taken to bring the country “closer to our ultimate objective of having an inclusive payment system where no adult Filipino is left behind in terms of access to payment and other basic financial services.”
Of course, even as the fintech ecosystem evolves, challenges such as limited financial literacy and low financial inclusion still remain. There is a need for the Philippines to address these gaps in order to keep pace with their regional peers and accelerate growth in the fintech space. However, the growing popularity of digital payment systems can pave the way for such development. Only time will tell.
Epimaco V. Densing III, Undersecretary for Operations, Department of Interior and Local Government, said in the forum, “What we’re experiencing right now, in terms of digitalization, is the normal that we want. Moving forward, everything should be digitalized.”