Finance



By Imee Charlee C. Delavin, Reporter


Electronic payments in the country steadily growing




Posted on July 08, 2016


CARD USAGE in the Philippines continued to grow last year, a Visa official said yesterday, and the trend is seen further expanding as more Filipinos embrace digitization of payments.

Stuart Tomlinson, Visa Country Manager for the Philippines and Guam -- IMEE CHARLEE DELAVIN
Credit and debit card purchases also helped stimulate the country’s economic growth in the last five years, adding P4.6 billion to the economy from 2011 to 2015, with increased electronic payment usage adding an average of 3,460 jobs per year in the same period, according to global payments technology firm Visa, Inc.

Globally, card usage added $296 billion and 2.6 million jobs to the global economy during the five-year period, Stuart Tomlinson, Visa country manager for the Philippines and Guam, said, citing results of a study done for the firm by Moody’s Analytics.

“We’re seeing electronic payments slowly but steadily growing in the Philippines... we’re heading in the right direction but the amount is still small,” Mr. Tomlinson said on Thursday.

“It is a very significant tool to improve the economy... digital space is the future of payments,” he added, noting that in countries like the Philippines were mobile penetration growth is very high, there is bigger opportunity to bring in more people to the financial system.

Card penetration in the Philippines was at 11.4% in 2015 from 9.2% in 2010. Cash still accounts for bulk of transactions at 82.3%, although down from five year’s ago rate of 84.4% while bank transfer, direct debit and checks stood at 6.3%, also declining from 2010’s 9.2%.

Moving forward, Mr. Tomlinson said Visa expects the growth in e-payments to continue with the booming e-commerce industry in the country seen to boost digital transactions.

“Visa considers the debit card segment, composed of young adults, as part of its strategic focus in the Philippines and one of the key growth drivers in the payments industry,” the Visa official said.

He noted the huge opportunity in the Philippines to grow debit card usage, with young adults accounting for 20% of the country’s discretionary consumption. Debit card use is also seen apt for developing countries like the Philippines with only about 10-15% of the population are credit eligible, and the rest are potential market for debit cards.

Earlier, the Visa official said the biggest challenge is changing the behavior of the consumers towards digital payments, aside from persistent infrastructure concerns.

CONTRIBUTOR TO GROWTH
The Moody’s Analytics report titled “The Impact of Electronic Payments on Economic Growth,” which was conducted from 2011 to 2015, covering 70 countries representing almost 95% of global gross domestic product (GDP), noted that the findings reinforce the many positive benefits that electronic payments bring to local economies.

“While electronic payments’ contribution to the national economy is sizeable, there are untapped opportunities for the nation,” Mr. Tomlinson said.

The study estimated that electronic payments contributed some $983 billion to the GDP of the 56 countries over the five-year period that was covered. Real global GDP grew by an average 1.8% per year from 2008 to 2012; without card use, that would have been just 1.6%.

The Visa-commissioned study also found that increased use of electronic payment products -- including credit, debit and prepaid cards -- added $296 billion to GDP, while raising household consumption of goods and services by an average of 0.18% per year.

Electronic payments are a key GDP driver for many regional economies. Asian countries experienced an average GDP increase of 0.06% resulting from increased card usage in the past five years -- compared to the Philippines’ 0.01%.

Moody’s Analytics explained that card use raised consumption as cards provide greater convenience versus cash in buying and selling.

The research arm of credit rater Moody’s Investors Service said in the study that since consumption growth is, on average, faster in emerging economies, those countries also have more to gain by increasing card usage.

Across the 70 countries in the study, Moody’s cited that every 1% increase in usage of electronic payments could produce, on average, an annual increase of approximately $104 billion in the consumption of goods and services.

AFFLUENT FILIPINOS SPENDING
Meanwhile, the global payments technology firm said spending among affluent Filipinos is on the rise with use of Visa premium cards driving electronic payments in the Philippines, making up 46% of total payment volume in 2015, despite accounting for only 22% of total active cards in the market.

The largest portion of affluent spending, Visa said, went to retail (18.70%), travel (18.66%), supermarkets (13.8%), restaurants (6.8%) and fuel at 4.68%.

Visa said among affluent Filipinos, outbound spending rose 14% in 2015. Six out of ten top destinations for affluent Filipinos were in Asia. Visa said travel to Japan increased by 97% in 2015, while travel to Thailand was up by 52% over the past year. Singapore posted a 39% year-on-year increase and Hong Kong saw a 24% rise.

“Visa ensures that its global premium platform lives up to their expectations by offering generous discounts and privileges during their travels around the world,” Mr. Tomlinson said, enumerating perks for its card users from accommodations and store discounts to cash-back for online purchases.