How a robust payment ecosystem can help empower consumers and small businesses
MANILA, Philippines - It is an exciting time to be in business. Around the world, technology is fundamentally changing the relationship between consumers and the businesses that serve them. This has led to significant market and industry disruption and the payments industry is no exception.
In the Philippines, three forces are transforming the way we pay and get paid: the digital revolution that is now empowering small businesses; the increasing number of tech-savvy Filipino youth; and the rise of Asean as an integrated economic bloc.
Digital revolution as an enabler for SMEs, consumers
Technological advances have changed the way people engage in commerce. Ecommerce and mcommerce (mobile) have expanded access to goods and services while point-of-sale (PoS) and contactless technologies have made payments faster and safer.
These technologies have enabled small and medium enterprises (SMEs) to capture their own markets and grow their businesses. Employing 65 percent of the workforce and accounting for 35 percent of the country’s gross domestic product, SMEs play a pivotal role in boosting growth opportunities for the communities where they operate. SMEs better understand their market so they are able to offer them more personal and intuitive products and services.
New technologies are also increasing the interplay among payments-linked industries. We have new payments solutions like Samsung Pay and Apple Pay which are built on Visa’s tokenization technology, where personal account data is substituted with a non-sensitive equivalent to minimize the possibility of data breaching.
Mobile operators are also providing consumers with converging payment options. For instance, Smart Communications together with Citibank and Visa last year introduced Charge2Phone (C2P), combining the country’s first contactless Visa payWave sticker for face-to-face transactions and Smart’s own eCommerce solution.
Some of these developments disrupt the industry. But I welcome these changes, since an increasingly diverse payment ecosystem empowers consumers and merchants.
Tech savvy Pinoys
If there ever was a Fountain of Youth, it would probably be in the Philippines. A study by credit rating agency Moody’s categorized the Philippines as “not aging” from 2015 until 2030, meaning that the share of the elderly population to the total number of Filipinos will be below seven percent. Such demographic advantage will rejuvenate the Philippine economy as young adults, who currently account for 20 percent of the country’s discretionary consumption, are set to make up 50 percent of total discretionary expenditure by 2020.
From Visa’s own research, we found out that young adults exhibit a strong desire to eliminate the use of cash from their everyday life (55 percent) through electronic means. They are largely seen to play a critical role in influencing payments in the future.
Businesses follow this segment in online channels and social media, and entice them by offering products and services that support their lifestyles such as rewards and rebates, discounts, credit card installment, and platform-specific privileges.
Electronic payments
The opening up of Southeast Asia, through the Asean Economic Community, means hundreds of millions of customers for local businesses. Imagine the volume of trade that this will create. Government regulators and large financial institutions are gearing up for the impact of the AEC by promoting electronic payments platforms to spur growth in commerce.
The Bangko Sentral ng Pilipinas is taking a bold step in promoting cashless transactions by 2016 with the National Retail Payment System. Visa also recently licensed its EMV chip technology to BancNet to help speed up the BSP-mandated migration to EMV chip-enabled cards by January 2017.
These initiatives will provide consumers with greater means to purchase quality products and services while reducing costs and increasing payment security among Asean’s 10 member states.
Businesses are now able to export their goods and services to wider markets and establish international affiliations as cross-border transactions become more flexible.
Opportunities abound in the Philippines as it embraces an electronic payments ecosystem. Technological advancements are freeing up the playing field for local businesses to expand their footprint and market share. Consumers also have a myriad of options when purchasing products and services that best fit their needs.
While it may take a few more years for the Philippines to have a fully integrated payments landscape, it is good to know that government leaders and industry players have taken the first step to realize this goal.
A robust electronic payments ecosystem supports the growth and dynamism in the trade and consumer goods sectors. This will positively impact the economy and help the country journey towards a progressive cashless society.
A payments business veteran and no stranger to Southeast Asia, Tomlinson has held a number of regional and country management positions in Visa, including country manager for Vietnam, Cambodia and Laos, and most recently country manager for Malaysia.
Stuart D. Tomlinson is Visa country manager for the Philippines and Guam