Virtually all retail financial transactions in the country are being done using cash, creating inefficiencies and leakages in the country’s economy, initial findings of a new study being cited by the central bank has shown.
Deputy Governor Nestor Espenilla Jr. of the Bangko Sentral ng Pilipinas (BSP) disclosed Wednesday that a recent survey showed that 98 percent of all retail transactions in the country, whether among individuals or among businesses, were done in cash.
“Imagine the lack of transparency that it generates in the economy,” Espenilla said, citing initial findings of an unreleased study by the Better Than Cash Alliance.
He said the study, which was presented to BSP officials recently, showed the country lagged far behind countries like South Korea, where as much as 60 percent of all transactions are “digitized” or done using credit cards, debit cards and other electronic platforms.
The Better Than Cash Alliance is a privately funded organization that promotes the increased use of electronic payment platforms like credit cards and mobile phone wallets around the world.
The group was formed in 2002 and was funded initially by the Bill and Melinda Gates Foundation, the US Agency for International Development (USAID) and multinational firms Visa Inc., Citigroup and Ford.
The prevailing preference for cash over electronic payments in the Philippines comes despite the country’s reputation as one of the world’s leaders in the creation of innovative applications for the use of electronic platforms.
Espenilla said the use of cash was often a source of leakage, which created problems particularly for tax authorities.
Handling money was also significantly more expensive than processing electronic payments, he said. “From producing it, moving it, guarding it and even destroying it, with cash, it’s all cost,” Espenilla said. “Digitized money is also [easier to track]. Not only is it more efficient, it’s also more transparent… because everything is recorded,” he explained.
For instance, the billions of pesos in doleout under the Aquino administration’s Conditional Cash Transfer (CCT) program were disbursed using mobile phone wallets with the help of the country’s top telecommunication companies.
Last Thursday, dominant carrier Smart Communications and the LandBank of the Philippines launched a new service that would allow CCT beneficiaries to automatically save part of the money they get from the government. Half of this money can then be borrowed and used as capital for the sale of prepaid mobile phone load credits.