Philippine debit card market seen growing

Debit cards have been in the Philippines for years, and there may still be a lot of room for growth as more Filipinos enter the banking system.

A debit card is a plastic card that is linked to a bank account or credit card. It allows a user to pay for purchases by drawing on the remaining balance of the linked account. A debit card may also act as automatic teller machine cards (ATMs), and there are some ATMs that double as a debit card.

Debit cards are different from credit cards, which give the user a line of credit.

A variant of the debit card is the prepaid card, which does not require a cardholder to have an account in the issuing bank. It does require the user to reload or “top up” the balance to continue making purchases with the card.

Existing ATM networks (BancNet, MegaLink ExpressNet) also developed their own Point-of-Sale or POS System to allow their cardholders to pay for purchases electronically through their ATMs for credit to the retailer’s account, according to the Bangko Sentral ng Pilipinas.

BDO Capital & Investment Corp. president Eduardo Francisco said in a phone interview: “BDO has hundreds of thousands issued in the last few years. Some are branded as debit cards and others as cash cards. We use them to give salaries, allowances, insurance agent commissions, direct marketing commissions, so there are many applications. We even private label debit cards so a company can label them as their own and give them to members. They can withdraw anytime, even abroad, and use [the card] to pay merchants.”

Debit card users treat their cards like ATMs, Francisco said, since they can withdraw anytime. Debit cards, however, are accepted in an increasing number of establishments, so the holders need not withdraw cash using their ATMs before making a purchase.

“Companies can use them to improve their cash management. They fund debit cards just before the funds are needed so there is minimal float lost. It also does away with paper work as there is an electronic trail of credits for audit purposes,” Francisco said.

Joey Ramos, president of China Savings Bank, said in a separate phone interview that the three-year-old subsidiary of China Bank is looking at the possibility of issuing debit cards.

Although China Bank already offers ATMs that double as debit cards through the BancNet network, there is an untapped market for those who cannot afford the maintaining balance (usually P5,000 or higher) required by many banks.

Ramos also noted that not many Filipinos are credit card holders and there are even fewer debit card holders, thus there’s room for expansion.

“We’ve seen that the tendency is for people to use cash or go straight to the credit card for big purchases,” he said. There is, however, an underserved market for ATMs with very low maintaining balance and can double as a debit card.

The Inquirer has reported that San Francisco-based Visa Inc. also sees great potential for growth in the debit card market in the Philippines.

Iain Jamieson, country manager for Visa Philippines and Guam, had said that debit card users were on the rise in the country.

Jamieson also predicted that there will be a shift to online purchasing, given the increase in transactions made online during the fourth quarter in 2010.

Visa Inc. facilitates electronic funds transfers worldwide by partnering with financial institutions that then issue Visa-branded credit and debit cards, among other products.