Cash losing hold on its throne

Dan Wolbert

Cash is king, it’s often said. And for a long time, it was an undisputed fact of everyday payments in the Philippines.

The unprecedented new coronavirus disease (COVID-19) pandemic, however, has prompted consumers to carry less cash in their pockets.

Due to health-related concerns, social distancing and lockdown protocols, preference for cash payments for everyday transactions in the country has significantly gone down, according to the 2020 Visa Consumer Payments Attitudes survey.

Prior to the pandemic, seven of 10 transactions involved cash. This went down to just half, or one of two transactions, with the onset of the health crisis in 2020, Visa’s research showed.

Whether it’s to buy consumer goods, settle bills or send money to charity, more Filipinos are going cash-lite, if not totally cashless.

This shows that the Philippines may be moving ahead of the goal of the Bangko Sentral ng Pilipinas (BSP) to convert 50 percent of total volume of retail payments into digital form by 2023.

First time online shopper

More people have also embraced online shopping, based on Visa’s research. It showed that 52 percent of Filipinos had shopped online through apps and websites for the first time during the pandemic and 43 percent of them made their first online purchase using social media channels.

“The pandemic has transformed the way Filipinos shop and pay. Based on the latest highlights from our annual Visa Consumer Payment Attitudes study, we see adoption of new consumer behaviors including more Filipinos using digital commerce platforms and helping to accelerate the usage of digital payments in the country. Based on Visa’s data, we see double-digit growth for e-commerce transactions for purchases on marketplaces and digital goods,” said Dan Wolbert, Visa country manager for the Philippines and Guam.

Consumer Payment Attitudes study is an annual study conducted on consumers to assess their payment behaviors across Southeast Asia on payment trends. This year’s study includes themes on consumer payment trends due to COVID-19, digital banking and interest in new payment solutions. Research was conducted in August and September 2020—at a time when the government started to ease some of the lockdown protocols—via an online questionnaire.

The survey covered 1,014 Filipinos from key areas such as Metro Manila, Cebu, Cavite, Quezon, Laguna, Rizal, Bulacan, Davao del Sur, Pampanga, Negros Occidental, Batangas, Cagayan de Oro, Iloilo, Baguio and Davao provinces.

About 73 percent of the respondents cited the adoption of contactless payments as a primary reason for carrying less cash, while 54 percent perceived cash as unsafe because of the potential spread of infection.

Another key reason—cited by 50 percent of the respondents—is that more places are adopting digital payments.

According to Visa’s study, Filipinos see bill payments (81 percent), grocery shopping (71 percent), and overseas travel (68 percent) as the top categories where they would likely go completely cashless in future.

Initial purchases

Wolbert also noted that one in four active Visa cardholders made their first e-commerce purchase during the first half of last year. Categories where they made their initial purchases included food and groceries, bill payments and pharmaceutical products.

Close to nine out of 10 Filipinos increased their online shopping activities on websites or apps in the past year, while seven out of 10 shopped more on social media channels. More than half of the consumers were also more inclined to shop from large online marketplaces (53 percent) and home-based businesses (61 percent).

The study also showed a large user base who started ordering home delivery, likely due to lockdowns or movement restriction order in the country during the pandemic.

More than nine out of 10 Filipinos used home delivery in the Philippines and 67 percent of them increased their use of home delivery services during the pandemic.

These new shopping preferences are seen to turn into habits that will last beyond the pandemic.

But while the volume of cashless transactions increased, the average transaction value was smaller than the previous year.

This was attributed by Visa to a couple of reasons. The increased usage of contactless payments include a larger volume of lower ticket size transactions as consumers become more accustomed to making digital payments for small ticket size transactions. Secondly, items commonly purchased on e-commerce platforms consist of essential goods which are cheaper.

Room for improvement

As travel and tourism ground to a halt last year, a bigger chunk of nondiscretionary spending likewise disappeared during the pandemic.

When it comes to preferred payment method, Wolbert said there’s definitely room for improvement in the Philippines.

While 53 percent of people now carry less cash in their wallets, having about half of consumers preferring cash payments was still not at par with other countries in the region. In Singapore, cash preference was only at 15 percent of the respondents, while in Malaysia and Indonesia, preference for cash payments stood at 23 percent and 28 percent, respectively.

The Visa study, for its part, showed that usage of contactless payments had increased by 66 percent among current users due to the pandemic. In addition, 88 percent of Filipinos who had not used contactless payments stated interest in using this payment method in the future.

“Based on Visa’s data, contactless transactions have been increasing steadily month-on-month in the Philippines since August last year. We believe that contactless payments will continue to grow as Filipinos appreciate the benefits of contactless payments, including perceiving this payment method to be more hygienic due to the absence of physical interaction at point-of-sale. Even though we’ve made progress in digital payments adoption, there remains huge opportunities for us to encourage more Filipinos to embrace digital payments as we look to expand digital payments acceptance across the country,” added Wolbert.