52.8% of retail payments now digital -- BSP

The Bangko Sentral ng Pilipinas (BSP) announced Tuesday, July 23, that 52.8 percent of total retail transaction volume in the Philippines have migrated or converted into digital form as of end-2023, exceeding the original target of 50 percent.

Based on the BSP’s Digital Payments Transformation Roadmap and its National Strategy for Financial Inclusion, by end-2023, half of all payment transactions should be in digital form while 70 percent of adult Filipinos should have formal accounts. There is no update yet on the formal accounts’ data.

The end-2023 e-payments transactions of 52.8 percent of all retail payments was higher than end-2022’s 42.1 percent. As of end-2021, 56 percent of Filipino grown ups have financial accounts, still way to go before achieving the 70 percent target.

In a press briefing Tuesday, BSP Deputy Governor Mamerto E. Tangonan who is in charge of the BSP's Payments and Currency Management Sector, announced the “good news” of surpassing the target based on e-payments indicators which measures the volume and value of digital payments.

Tangonan reported that last year, the share of digital payments to total retail payments of 52.8 percent is equivalent to 2.62 billion monthly payment transactions made digitally. This translates value-wise to $110 billion or P6.1 trillion. “This is 55.3 percent of the total value of digital payments, a surge from 40.1 percent in 2022,” he said.

In a separate statement, BSP Governor Eli M. Remolona Jr. who was not in the press conference, said the above-target e-payments transactions was “proof that our pursuit of a cash-lite economy has consistently been progressing” and now that they have achieved their initial goal, “we are ready to bring digital finance to new heights.”

The next target is to achieve a 60 percent to 70 percent share of digital payments over total retail transaction volume by 2028.

Tangonan said the next 20 percent will be more challenging than the first 50 percent.

“That’s the next target 60-70 percent by 2028. That was cast upon issuance of the Philippine Development Plan for the term of the current president. Of course that was driven by our inputs and collectively drawn by both the BSP and the payments industry,” said the BSP official.

When the BSP started its digitalization roadmap in 2013, only one percent out of the 2.5 billion monthly retail payments was electronic.

Tangonan said what drove the e-payments growth in terms of volume was the high frequency, low-volume retail transactions such as merchants payments and person-to-person (P2P) transfers.

Key driver merchants payments increased by 12.8 percent to 1.701 billion transactions by end-2023 from 1.507 billion in 2022, based on the 2023 Report on E-Payments Measurement of the BSP. 

The main contributors to the growth in e-payments were merchant payments which accounted for 64.9 percent of monthly digital payments volume; P2P transfers at 19.3 percent; and business-to-business supplier payments at 6.1 percent.

Supporting the increased digitalization of merchant payments was the surge in QR Ph person-to-merchant (P2M) transactions.

The volume of QR Ph P2M transactions increased by 2,713.9 percent from 2.1 million in 2022 to 58.6 million in 2023, according to the report. This significant growth were mostly made by small-value retail transactions.

“E-wallets appear to be the preferred transaction account in making QR Ph-enabled payment services for buying goods and services,” said the BSP. Non-bank e-money participants accounted for 95.1 percent of the total volume of QR Ph P2M transactions last year.

Ownership of transaction accounts also grew which are mostly e-money accounts.

Based on the report, among the three use-cases, the government sector led the transition to digital with 97.7 percent of its transaction value being cash-lite. Person-to-X (P2X) e-payments have grown by 12 percent or about 75.1 percent of the transaction value. Meanwhile, business-to-X (B2X) digital payments reached 35.4 percent of the total transaction value.

Tangonan said what comes next is the expansion of other payment rails such as Request to Pay (RTP) facility which will be launched this year and Direct Debit to be piloted in 2025.

RTP is a payment overlay service for a secure messaging between a payee and a payer, thereby giving both consumers and businesses “enhanced control over their outgoing payments” such as utility payments.

As for Direct Debit, this is a payment service for recurring payments such as monthly rentals, loan amortizations and insurance premiums. It allows for recurring bills to be paid on time and in full, avoiding penalties.