Filipino consumer affluence rising

As the Philippine economy becomes one of the fastest growing in the region, consumer affluence rises, according to global payments solutions firm Visa Inc.

This, based on data from Visa Inc., was driving the growth of electronic payments in the country.

In a briefing Thursday, top Visa officials said card usage in the country, an indicator of “electronification” of payments, added P4.6 billion and 3,460 jobs to the domestic economy from 2011 to 2015.

Last year, payment volume of all Visa cards in the Philippine grew by 8.6 percent.  The payment volume of domestic premium Visa cards expanded at a faster pace of 33 percent while the ratio likewise increased over the years. Although accounting for only 22 percent all active cards in the domestic market, premium Visa cards accounted for 46 percent or almost half of total payment in 2015.

“Over the years, Visa has introduced a series of cards to help Filipino consumers enjoy the convenience of electronic payments,” said Stuart Tomlinson, noting that his company teamed up with Citibank in 2001 to launch the first premium Visa card in the Philippines.

“The card created a new segment at that time,” he said, noting that today, there were now nine partner banks issuing premium cards “to cater to the growing affluent community.”

Premium cards give holders higher credit limits, more attractive lifestyle privileges from golf to dining to shopping and a higher level of rewards program and priority customer service compared to regular cards.

The “affluent” consumer market is defined as the segment that’s one tier below the high-networth individuals. They are typically defined as individuals who earn more than P1 million yearly, although some banks bring the threshold down to P500,000, depending on strategy.

Affluent customers tend to travel a lot and have greater spending power.  Based on data from Visa, affluent Filipinos outspend the average cardholders by 169 percent.  The largest portion of affluent spending goes to retail (18.7 percent), travel (18.66 percent), supermarkets (13.8 percent), restaurants (6.8 percent) and fuel (4.68 percent).

“The growing affluent are also avid travelers,” Tomlinson said.  “Visa is confident that our growing premium platform will enable our cardholders to make the most of their travel, providing discerning Filipinos with bespoke benefits they are not aware are out there.”

Based on Filipinos’ card spending, the top 10 outbound destination and the respective growth rates of travellers in 2015 were: USA (39 percent), Singapore (39 percent), United Kingdom (41 percent), Hong Kong (24 percent); Japan (97 percent); France (22 percent); Australia (30 percent); Thailand (52 percent); UAE (57 percent) and Italy (42 percent).

Citing a study on the affluent market, one out of five opts for personal guided tours and customized itineraries.  Over the past two years, the number of those who travel alone has more than doubled, and most of them select spontaneous and passion activities such as sports.  Shopping in large malls accounts for the second most popular travel activity.

Most affluent travellers choose to stay in five- or four-star hotels and typically value complimentary stays, early check in and late check-out as important benefits.

Recognizing the needs of the affluent market, Visa also offers up to 8 percent cashback for featured e-commerce platforms.  About 16 percent of spending by premium cardholders is done online, helping drive the 10 percent growth in e-commerce volume last year.

Also, Philippine premium cardholders spend more than their counterparts in neighboring countries like Indonesia and Vietnam.

While the country remains primarily a cash-based economy, card payments—whether credit (buy now, pay later), debit (buy now, pay now) or prepaid (pay now, buy later)—have risen over the years.  These accounted for 11.4 percent of personal consumption expenditure in 2015 compared to only 9.2 percent in 2010.