HIGHLIGHTS REPORT

STATE OF
digital payments
in the philippines
2019 UPDATE AND 2020 PREVIEW
1
 AUTHORS Introduction
Raymond ESTIOKO, Bridget Rose MESINA-ROMERO The Philippines continues to expand its digital adoption as discussed in this
and Maria Christina MASANGKAY, Bangko Sentral ng Pilipinas Highlights report which captures the progress of payments digitalization in the
country in the last two years. This report discusses the trajectory of key payment
Isvary SIVALINGAM, Better Than Cash Alliance
use-cases that were identified 1 to offer the most promise – both in terms of
Cover photo: © PayMaya Philippines increasing the share of digital payments as well as democratizing the benefits
of digital payments – and shows that payments made by individuals such as
All photos used with permission from PayMaya Philippines. merchant payments and remittances remain key contributors to growth.

The COVID-19 pandemic has also catalyzed the

shift in awareness and has provided the necessary
push for more consumers – individuals, businesses
and the government – to use digital payments as
the country was compelled to implement necessary
health and social-distancing protocols.
These results are encouraging, as the Bangko Sentral ng Pilipinas (BSP)
remains committed in pursuing a cash-lite economy, relentlessly putting in
place enabling policy and regulatory reforms to promote a safe, efficient
and reliable national payment system that ensures responsible digital payments
for all. Its deliberate approach to leverage technological advancements,
promote the use of innovative products and services, and its uncompromising
stance to enable interoperability have provided the critical foundations
for the continued adoption and usage of digital payments in anticipation
of a “New Economy” post-COVID, in which increased consumer reliance
on digital platforms and channels is expected.

1
State of Digital Payments in the Philippines, 2019; Bangko Sentral ng Pilipinas and Better Than Cash Alliance.

2 2 STATE OF DIGITAL PAYMENTS IN THE PHILIPPINES 1

 2019 Digital Payments volume
and value continue stable
growth from 2018

The volume of monthly digital payments in the Philippines grew from 10% 2
in 2018 to 14% in 2019. This corresponds to a 27% increase in volume, driven
primarily by high-frequency, low-value retail transactions, like merchant payments.
In 2019, an estimated 4.8 billion payments were made per month. Individuals
comprised the largest group of payers making nearly 77% of all payments in the
country, followed by payments made by businesses (22%) and by governments
(1%). Of these three groups, government payments (G2X) are the most digitized,
as they were the previous year. 80% of G2X payments by volume were made
through digital channels, up from 63% in 2018. In contrast, the business sector
(B2X) is the least digitized, with only 6% of its payments in digital form. Payments
made by people (P2X) are 15% digital (up from 12% in 2018).
The value of monthly digital payments grew to 24% of all transactions in 2019,
up from 20% in 2018. Business to business transactions (the majority of which
are supplier payments) formed the bulk of payments by value. They remained
largely unchanged from year-on-year, with a comparatively smaller growth rate of
14%. Growth in volume of digital payments has been driven by small-ticket retail
payments and hence their impact on the overall value of total digital transactions
is limited.
In terms of average monthly value of transactions in 2019, some 87%
(PHP320 billion) of payments of the government (G2X) are already in digital form,
followed by payments of persons (P2X) at 28% (PHP451 billion). Payments made
by businesses (B2X) lag at 17% (PHP765 billion).

27% increase Figure 1: Shift in and share of digital payments BY VOLUME Figure 2: Shift in and share of digital payments BY VALUE
in volume Classified by the payer and overall
All numbers are in millions © PayMaya Philippines
Classified by the payer and overall
All numbers are in USD billions
of digital
payments in
2019 driven p2X B2X G2X OVERALL p2X B2X p2XG2X B2XOVERALL
G2X OVERALL p2X B2X G2X OVERALL
primarily by Non-Digital 3,162 1,002 6 4,171
Non-Digital 3,162
Non-Digital 1,002 22 6 73 4,171 1 96
Non-Digital 22 73 1 96
merchant Digital 569 65 26 660
Digital 569
Digital 65 9 26 15 660 6 30
Digital 9 15 6 30
payments

Share of 2019 15% 6% 80% Share of

14% 2019 15% of
Share 6%
2019 28%80% 17% 14% 87% Share
24% of 2019 28% 17% 87% 24%
digital digital digital digital
payments 2018 12% 5% 64% 10%
payments 2018 12%
payments 5%
2018 25%64% 15% 10% 80% 20%
payments 2018 25% 15% 80% 20%

Growth in volume of digital payments has been driven

p2X B2X G2X OVERALL p2X B2X p2XG2X B2XOVERALL
G2X OVERALL
by small-ticket p2X payments
retail B2X and G2Xhence OVERALL
their impact
Non-Digital 2,932 915 6 3,853
Non-Digital 2,932
Non-Digital 915 20 6 68 3,853 1 88
Non-Digital 20 68 1 88
on the overall value of total digital transactions is limited.
Digital 697 57 28 782
Digital 697
Digital 57 11 28 12 782 6 29
Digital 11 12 6 29
2
All values refer to the percentage share of total payments for the given year, BSP.

2 3
 Non-Digital 3,162 1,002 6 4,171 Non-Digital 22 73 1 96
Digital 569 65 26 660 Digital 9 15 6 30

2020 Strong evidence indicates that Consumer payments make up the largest proportion (78%) of the 4.6 billion
monthly payments, followed by corporate payments (21%) and payments by
the government (1%). The level of digital payments in each use-case remains
COVID-19 has increased adoption the same as previous years, with 82% of government payments made digitally,
followed by digital payments by consumers (19%). The business sector’s rate

of digital payments by consumers of digital payments is lowest (6%), a percentage unchanged since 2019.

and merchants In the first half of 2020, the largest share of digital payments is G2X, with 87%
(equivalent to PHP319 billion), followed by P2X with 35% (PHP547 billion),
and digital
Share of 2019 15% 6% 80% 14% Share ofpayments
2019
made by B2X at 15% (PHP611 billion).
28% 17% 87% 24%
Early estimates from the first half of 2020 3 suggest that digitaldigital
payments rose digital
p2X B2X G2X
to 17% of all monthly payments, propelled by payments made
OVERALL
payments 2018
to merchants 12% 5% p2X64% B2X10% G2X
Consumer OVERALL
Figure 2018
4: Shift in
payments 25%of digital
and Share 15%
payments80% BY VALUE 20%
Non-Digital
and person-to-person 3,162 During
payments. 1,002this same6 time, the average
4,171 monthly Non-Digital 22 73 1 96
valueDigital
of digital payments 569
increased marginally as 26
well, from 24%
payments Classified by the payer and overall
All numbers are in USD billions
65 660 to 25%. Digital 9 15 6 30
made up the
For consumers, the use of digital channels for retail use cases
p2X B2X 78% of OVERALL
G2X the p2X B2X G2X OVERALL
such as merchant and utility payments is powering the spread
of digital payments. One e-money issuer saw a 1000% Non-Digital
year-on-year 2,932 915 6 4.6 billion
3,853 Non-Digital 20 68 1 88
increase in remittances, and one large convenience Digital saw a
store 697 57 28monthly 782 Digital 11 12 6 29
10-fold increase in digital payments in the first half of 2020 4.
payments
For merchants, a boom in e-commerce transactions and merchant in 1H 2020
acquisition by BSP-Supervised Financial Institutions (BSFIs) is swiftly
expanding the appeal of digital payments. Some large retailers are
experiencing two to three million more monthly site visits than in
the first quarter (Q1) of 2020, and BSFIs acquired five times as many
Share of 2019 15% 6% 80% 14% Share of 2019 28% 17% 87% 24%
digital merchants in the first half of 2020 as they did in in the entire year digital
payments of 2018
20185. 12% 5% 64% 10% payments 2018 25% 15% 80% 20%
17% of
all monthly Figure 3: Shift in and share of digital payments BY VOLUME
Classified by the payer and overall
payments All numbers are in millions
Share of 1h 2020 19% 6% 82% 17% Share of 1h 2020 35% 15% 87% 25%
digital digital
by volume p2X B2X G2X OVERALL
payments 2019 15% 6% p2X60% B2X14% G2X OVERALL
payments 2019 28% 17% 87% 24%
were digital Non-Digital 2,932 915 6 3,853 Non-Digital 20 68 1 88
in 1H 2020 Digital 697 57 28 782 Digital 11 12 6 29

T L E T L E
H AN ts ts CIA FAR ts H AN ts s CIA FAR ts
RC en P en O
S EL en RC en P e nt O
S EL en
E
M Aym P2 Aym W Aym E
M Aym P2 Aym W Aym 2018 DIAGNOSTIC
P P P 82% 84% P P P
3481 2019 DIAGNOSTIC
523 1H 2020 ESTIMATE

NON-DIGITAL
Share of 1h 2020 19% 6% 82% 17% Share of 1h 2020 35% 15% 87% 25% DIGITAL
digital digital 151
payments 2019 15% 6% 60% 14% payments 2019 28% 17% 44% 87% 24% 36

© PayMaya Philippines
3
Based on current data availability, estimates for the first half (1H) 2020 are discussed here.
4
As shared during stakeholder interviews. 24%
5
As shared during stakeholder interviews. 22%
NT L E 19% 16% T L E
A s s CIA FAR 13%
ts 15% AN ts s CIA FAR ts
R CH ent P e nt O
S EL en
H
RC en P e nt O
S EL en 13
4 ME Aym P2 Aym W Aym E
M Aym P2 Aym W Aym 2018 DIAGNOSTIC 11 5
P P P 82% 84% P
3481
P P
2019 DIAGNOSTIC
 Government action in 2020 What has driven digital payments
further accelerates awareness growth in the last two years?
and use of digital payments Merchant payments, Person-to-person
payments, and social welfare payments
For the government, steps taken to respond to COVID-19 by the BSP, in partnership Figure 5: Key use cases driving growth: Merchant, P2P and Social Welfare payments
with the Department of Social Welfare and Development (DSWD) and Department of Shift in and share of digital payments BY VOLUME
Labor and Employment (DOLE), have boosted awareness and use of digital payments
among Filipinos, through the digital delivery of emergency subsidies, conversion of 2018 2019 1H 2020
cash cards to transaction accounts, and encouraging digital salary payments. This
is testimony to the need for coordinated focus and action by whole of government
to achieve digital payment transformation at scale.
13% 15% 19%
(394M) (523M) (654M)
• Notably, the second tranche of the Social Amelioration Program of the DSWD MERCHANT payment
was primarily disbursed through nearly 10 million newly created transaction
accounts, which significantly boosted financial inclusion in 2020 6. Going
forward, the DSWD has also committed to convert the limited-purpose cash cards 16% 24% 22%
(23M) (36M) (32M)
used for its Pantawid Pamilyang Pilipino Program (4Ps) into full-service transaction
P2p payment
accounts. Social aid beneficiaries can prospectively use the funds received to
make various payments for food, clothing, and other essential needs through these
full-service transaction accounts. Plans for a new unified beneficiary database
for DSWD programs and the expansion of payment options for beneficiaries are
44% 82% 84%
(6M) (11M) (11M)
underway 7. The integration with the new national ID system (PhilSys) will also Social WELFARE payment
enable timely and reliable verification and enrolment of new beneficiaries.

• The Department of Transportation has also made steps toward further digitization
of payments by implementing the Automatic Fare Collection System (AFCS) which
benefits both passengers and operators through seamless, interoperable, and
contactless fare collection. All tollway operators have also been mandated to
implement cashless toll collections on all expressways and major toll roads.
Digital Digital merchant payments grew by 33% in 2019, and remain the largest payment
merchant use-case in terms of volume. The upward trajectory for merchant payments continued
in the first half of 2020, with a 25% increase. This increase contributed significantly
payments to the strong upward trend in overall volume for merchant payments, driven by the
grew by heightened usage of prepaid cards as well as electronic fund transfers (EFT) 8.

33% in 2019 In 2019, digital P2P payments also experienced an uptick, growing by 56% from
and an 2018 levels. This growth was fuelled entirely by increasing use of wallet-to-wallet
additional transfers, with monthly transactions increasing from 23 million to 36 million 9.
This growth was stunted in the first half of 2020, when P2P payments decreased
25% in by 11%. However, they remain one of the main drivers on the overall growth of
1H 2020 digital payments in the country.

Digital social welfare payments experienced notable increase year-on-year

growth in 2019, in both volume (89%) and value (128%). This huge shift was
brought about by the improvements in the digitization of Pantawid Pamilyang
Pilipino Program (4Ps) transfer and Social Security System (SSS) benefits
© PayMaya Philippines
disbursements. Estimates of social welfare payments for the first half of 2020
show minimal movement compared with 2019 figures.

6
Source: 2020 No One Left Behind: The Philippine Financial Inclusion Story 8
Source: Euromonitor data, 2020, and Dalberg estimations.
7
Source: Beneficiary FIRST Stakeholder Engagement Plan, 2020, World Bank. 9
Source: Electronic Money Issuers report, 2019, BSP-TRISD.

6 7
 B2B digital payments growth
expected with planned e-invoicing
pilots and simpler requirements
for businesses
COVID-19 Figure 6: Key use cases driving growth: Merchant, P2P and Social Welfare payments

has created Shift in and share of digital payments BY VOLUME AND VALUE
Acknowledgments
an opportunity 2018 2019 1H 2020
VOLUME

to ensure all 0.6% 0.6% 0.6% VALUE

payments are
(5M) (5M) (5M)

This continued commitment to driving digital payments growth in the Philippines

responsible 4% 4% 4% would not be possible without the leadership of Governor Benjamin E. Diokno.
SUpplier payment (USD 2,748M) (USD 2,786M) (USD 2,565M)

79% 80% 80%
(13M) (15M) (17M)
90% 91% 91%
Government payment (USD 4,424M) (USD 5,244M) (USD 5,306M)
Muted growth in two major use-cases 10: Business-to-business (B2B)
supplier payments remained largely unchanged in terms of both volume and
value in 2019. As highlighted in the 2019 Report 11, an estimated USD 20–45 billion
in annual savings can be realized from digitizing supplier payments. Acknowledging
this potential, the Bureau of Internal Revenue (BIR) has prioritized e-invoicing and
e-receipt as two of the key online systems to be developed under its digital
transformation roadmap. In 2021, a pilot is also planned and, in anticipation
of an eventual roll-out, requirements for registering computerized accounting
systems have also been simplified, with companies no longer requiring a permit.
Government payments , which are already significantly digitized, only increased by
12
two percentage points in volume for 2019 and remained constant in the first half of 202013.
COVID-19 has created an opportunity to ensure all payments are responsible 14
The COVID-19 crisis has been a global wake-up call on the importance of a digital
ecosystem that enables the continuation of social and business interactions and
commerce. The pandemic has helped to boost adoption of digital payments.
In the Philippines, earlier investments to develop a National Retail Payment System
founded on interoperability paved the way to reap the benefits of digital payments
in times of crisis.
We thank Deputy Governor Mamerto E. Tangonan, Assistant Governor Edna C.
Villa, and Managing Director Vicente T. De Villa III for their stewardship and for
always challenging us to raise the bar. We also thank the rest of the Private Sector
Operations Department (PSOD) for their dedicated efforts to undertake extensive
data collection, as well as the updating and enhancing of the measurement model
jointly developed with the Better Than Cash Alliance.
The authors would also like to thank Dalberg, a critical technical partner
commissioned by the Alliance to develop the 2019 diagnostic model – particularly
Vineet Bhandari, Swetha Totapally, Pratiksha Barasia, Adityendra Suman,
Saksham Khosla, and Devvart Poddar who contributed to this highlights report
with their research, analysis, and insights.
This report benefited from the strategic guidance of Alliance colleagues,
notably Dr. Ruth Goodwin-Groen, Camilo Tellez-Merchán, and Keyzom Ngodup
Massally. and the members of the Editorial and Publications Committee of the
Alliance. We are also grateful to Tanu Chhabra Bahl for her support in the design
of the report.
We also thank Paymaya Philippines for contributing the pictures in the this report.

In this period of rapid digitization, it is imperative to ensure that the digital divide is
not exacerbated. This translates to a firm commitment to equitable access to digital
payments and data protection for all Filipinos, as well as providing a better value
proposition to traditionally underserved groups, by working to include lower income
people, micro and small businesses, and women, in every possible way.

10
It should be noted that estimating growth for both use-cases is difficult and figures here are derived from various data sources.
11
2019 The State of Digital Payments in the Philippines.
12
Figure 6 does not track digital payments made as part of the Social Amelioration Program in 2H 2020, as it was an extraordinary
relief scheme in response to COVID -19 and will not feature as regular G2P payments.
13
Government payments here refer to all payments except for G2P social welfare payments.
14
The Better than Cash Alliance’s Responsible Digital Payment Guidebook offers nine guidelines to build trust in digital payments
and adapt to continuous innovation.

8 STATE OF DIGITAL PAYMENTS IN THE PHILIPPINES 11

 www.betterthancash.org www.bsp.gov.ph

12