Rising debit card use in PH to drive cashless payments growth
MANILA, Philippines – The use of debit cards is gaining traction in the country and could drive growth in electronic or cashless payments.
Multinational financial services firm VISA reported a 25.5% surge in all its local card transactions in 2014, spurred primarily by debit card payments. In the same year, its total debit card payment volume rose 38% from 2013.
“The growth in VISA card payment volume shows that more Filipinos are embracing electronic payments and doing away with cash,” said Stuart Tomlinson, the company’s country manager for the Philippines and Guam.
A rising trend, digitization of payments attracts consumers through its convenience and safety features.
In many economies, Tomlinson added, debit cards trump credit cards because the former’s requirement is simple: a bank account. It should be no different in the Philippines.
Debit fills the gap for the portion of the population that is ineligible for a credit card account. This group includes first-time workers, college students, and the voluntary unemployed such as housewives.
Debit cardholders can also spend their money on as-needed basis while having the access to their account any time. VISA takes this opportunity to expand contactless payment, which will in turn fuel everyday use.
Young adults as most active debit card users
“Electronic payments are a very, very valuable asset to an economy. As such, the Bangko Sentral ng Pilipinas (BSP) is also very focused on displacing cash in the economy,” Tomlinson said.
Still, the private sector and the government are looking at a cash-dependent society, as 82.3% of the country’s trade activities to date are cash-based.
All cards – by VISA and competitors MasterCard and American Express (Amex), among others – account for 9.2%. Bank transfers, direct debit, and checks compose the rest.
As one of its strategies, VISA targets young adults, dubbed as the debit card segment and representative of the 20% of the Philippines’ discretionary consumption in 2014.
Discretionary expenditure may refer to the cost of buying a non-basic item. The debit card segment is forecast to reach 50% by 2020.
In that light, VISA has introduced payWave, a payment method that eliminates signatures and PIN codes during checkout. Users just have to wave their credit or debit card in front of a secure reader and they are good to go.
At this point, the product has 7 issuers and 5,000 acceptance points. Among the issuers are Mercury Drug, Rustan’s, Starbucks, and BonChon.
To further enhance its security features, the company supports its client banks on the implementation of the EMV (which stands for Europay, MasterCard, VISA), Tomlinson said. Amex has been added to the lot, thus making the acronym EMVA chip technology.
BSP mandated all banks to convert magnetic stripe cards to EMV-chip enabled ones by January 2017.
Deepening relationships with stakeholders rounds up the firm’s goals. Tomlinson added that they value their partnerships with financial institutions, merchants, regulatory bodies such as the central bank, and non-traditional partners in telecommunication and non-profit sectors.
Nine out of 10 Filipinos shop online at least once a month, Tomlinson said.
Banking on the emergence of e-commerce, an industry that is now shifting to mobile commerce or m-commerce, VISA is set to partner with various providers of online shopping services.
Tomlinson admitted that VISA faces the same challenges that some of these companies encountered: changing consumer behavior; taking payWave to the 7,107 islands; and Internet speed issues.
Although e-commerce sites have started to rely and benefit from the cash-on-delivery system, Tomlinson is positive that in time, through their three-point goal, they will be able to cater to this industry by removing cash from the equation.
“To displace cash you have to be faster and more efficient,” Tomlinson added, “Otherwise, they will not adopt your product.” – Rappler.com
A freelance business writer, Shadz Loresco follows stories on entrepreneurs, technology, and finance. Her background includes 5 years of writing and editing for online business-to-business (B2B) marketing and reputation management.
Debit card image from Shutterstock