E-commerce boom faces infrastructure headwinds, Visa reports

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SINGAPORE — Visa, Inc. is optimistic about the growth of electronic payments in the Philippines as smartphones continue to proliferate, although infrastructure issues may hamper the development.

Chris Clark, Visa Regional President for Asia Pacific, said Philippine financial institutions will continue to work on developing the electronic payment ecosystem in the country.

“We’re going to see more and more cases of Philippine financial institutions wanting to work on new kinds and ways to pay, and specifically focusing on e-commerce,” Mr. Clark said in a press briefing on the sidelines of the Visa Security Summit held on Wednesday.

As more financial institutions move to advance digital payments in the country, Mr. Clark said the “exploding” usage of smartphones will play a key role.

“And as smartphones have proliferated in the Philippines, we’ve seen more of that growth come over the recent years,” he said.

According to Visa’s 2016 Consumer Payment Attitudes Survey, the country is increasingly shifting towards a cashless society as 57% of the Filipinos surveyed prefer electronic payments as opposed to cash. That number surged from the 46% logged the previous year.

The study noted that half of the Filipino respondents shopped using their smartphones at least once a month.

Despite the growing numbers, Mr. Clark mentioned some headwinds in growth, noting infrastructure gap in the rural areas.

“But again, it’s a question of the stage of development of the market. If you think about where the infrastructure and the wealth are centered, it is in the northern part of the Philippines,” he said, also citing urban areas outside Luzon such as Cebu.

“You have these areas in the Philippines which are very wealthy and have better infrastructure,” he said. “And when you think about the rest of the economy, more in rural areas, [these areas do] not necessarily always [have access] to mobile telephony, or even power in some cases.”

He added that banks are reluctant to invest in electronic payments in far-flung areas as returns are more guaranteed in urban centers.

“It’s also where the banks have chosen to invest in electronic payments,” Mr. Clark said. “I think the big focus has always been in Manila and in the large cities where they know that they can actually guarantee penetration of cash and where there are more affluent consumers that are willing to [use] cards.”

But despite these, Mr. Clark said that the growth of electronics payment in the Philippines is a “great achievement.”

“I don’t think the Philippines should be ashamed of the fact that it doubled its penetration of electronic payments over the ten-year period. That in itself is a great achievement,” he said, citing the 2017 period versus 2007.

In his keynote speech, Mr. Clark said that electronic payments across the world will continue to expand as new payment platforms continue to be developed.

“What we know is that three billion cards and 46 million merchants out there today are going to grow to more than 30 billion ways to pay and more than 400 million ways to be paid,” he said.

Mr. Clark explained that payment channels will grow exponentially as more devices are now interconnected.

“When you think about the internet of things, everything that we are seeing and buying now, such as mobile devices, refrigerators and cars, are connected in some ways to the cloud, to the internet,” he said. “So many of those things already have payment capabilities and capacity built in.”

He added that there is still a lot of room to grow, especially in the Asia Pacific region, as the usage of cash is still prevalent.

In a statement handed to reporters, the Asia Pacific region is an $11-trillion market in payment volume terms, and 55% of the transactions are still cash-dependent.

“Meaning, there is a $6.1-trillion cash opportunity waiting to be converted into digital payments,” Visa said.
— Karl Angelo N. Vidal