Going cashless: A mandate for the post pandemic world?
What would a world without cash look like?
For centuries, cash has been the predominant mode of payment in countries throughout the world. In Southeast Asia, the situation was much the same, including in the Philippines, where cash dominated the cultural conversation in barrios across the archipelago of islands. Then came the COVID-19 pandemic, and the payments conversation shifted quickly to digital.
In the early days of the pandemic, digital payments made up about a fifth (20.1%) of total financial transactions in the Philippines in 2020, up from 14% in 2019 and a paltry 1% in 2013. The Philippines is not the only nation reassessing how things are paid for; it is a global movement as the payments landscape across the world develops at a rapid clip.
The financial services industry has long been at the forefront of digital innovation but remains wary of strict compliance standards and a need to stay ahead of financially motivated scams and money laundering initiatives. In 2022, various payment systems and instruments are being introduced on a frequent basis.
Digital payments go viral in the Philippines
Traditionally, slower to innovate regions like Southeast Asia were forced to quickly adapt as a ripple effect of the pandemic spread out to every aspect of daily life – how people shopped for food and necessities, to embracing remote working and the digital tools to accommodate that, and how people transact with each other, to name a few. Some of these developments have been accelerated beyond COVID measures into becoming necessities as opposed to preferences.
E-commerce, for instance, has seeped into the mainstream. The convenience of online shopping and the option to compare items from different avenues before purchase made a lot of sense. And going out to buy groceries, once a chore that had to be dealt with physically while navigating around busy schedules could now be done online with a few clicks.
Another concern for close-knit communities in the Philippines and elsewhere during the pandemic was contact. Touching things became a sanitary issue, including making payments with good old cash or even credit and debit cards with PIN numbers. Thankfully, contactless digital payments were already a proven commodity, tested to be secure and convenient while minimizing the risk of unwanted contact.
Perhaps this is why, even as far back as March 2020, contactless payments surged by 150% compared to a year earlier. Online banking also grew in prominence as consumers experimented with performing more self-service banking transactions instead of queueing up at their local branch, including transferring funds both domestically and across borders. This led to mobile bank registrations spiking by 200% and online banking traffic in general picking up by a whopping 85% as early as April 2020.
e-Payments gaining across islands – and borders
Recognizing this tectonic shift in user behavior, the Philippines’ central bank Bangko Sentral ng Pilipinas (BSP), is hoping to drive the share of digital payments to half of all transactions performed in the country by 2023. The growth has been staggering with digital payments in the Philippines expanding at a compound annual growth rate (CAGR) of 115% in just the last two years.
Already a quarter (25%) of Filipino consumers consider cashless options as their primary payment method, while 78% prefer shopping in stores that offer digital payments. The Philippines government is supporting the growth by introducing real-time payment channels like the national Government e-Payments (eGov Pay) Facility, the National QR Code Standard (QR PH), and the mobile app-based method for instantly sending money to or from Philippine bank accounts and e-wallets, instaPay.
In a sign of the digitized payments momentum shift, five Southeast Asian (SEA) countries are now looking to link their national payment systems, enabling for the first time the biggest SEA economies – Singapore, Malaysia, Thailand, Indonesia, and the Philippines – to make cross-border digital transactions with less friction.
Not only would the agreement, set to go into effect this November, allow for financial settlements to be made in the local currency as opposed to leveraging the US dollar as an intermediary currency, but the digital flexibility of the payment infrastructure will open up the possibilities to link with other regional payment networks – with the potential to expand to encompass real time bank transfers and central bank digital currencies, too.
With real-time payments in the Philippines touted to grow 5-10x from current levels in the coming years, leading financial technology solutions provider Euronet Worldwide will power real-time digital payments for the Bank of the Philippine Islands (BPI) over the instaPay network.
Agilely powering the retail payments ecosystem lightyears ahead
BPI will implement Euronet’s Ren ecosystem of digital payments technologies in compliance with the new messaging standard ISO 20022, the improved remittance data standard that enables banks to create innovative business services that can make full use of real-time payments infrastructure. Ren powers streamlined digital payments over instaPay, including BPI services such as request to pay, proxy services, and bill payments for the bank’s retail and corporate customers.
The REN payments platform has already been leveraged to modernize the largest state-owned bank switching network in Indonesia, PT Jalin Pembayaran Nusantara, not just supporting the bank’s online and offline transaction switching processes between different payment modes but offering services via APIs that can power quick and efficient implementation of agile new financial products.
“As real-time payment systems become mainstream, banks require modern technologies to transform their legacy message structures to the new standards that allow them to provide better user experiences and enhanced features to their clients,” says Himanshu Pujara, Euronet’s Managing Director in the Asia Pacific (APAC). He adds, “We are proud to be working with Bank of the Philippine Islands, a leader in digital payments in the country, and enabling their digital transformation journey.”
As a pioneering leader in processing secure electronic financial transactions globally, it makes sense that Euronet would workwith BPI, the pioneering first bank in Southeast Asia, to deliver exceptional payment experiences. Ren leverages open APIs and microservices-based architecture to give retail and business customers the sort of agility and cross-platform convenience that is only made possible by advanced digital payments technologies.
The value-based positive changes of cashless payments are here to stay, and Euronet is leading the revolution with BPI in the Philippines. Click here to find out how you can be on the frontline, too.
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