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Over the last decade, the Philippine government and private sector have spearheaded several cashless initiatives in part to address the structural deficiencies of the country's economy, such as its poor financial inclusion levels and its heavy reliance on remittances. This paper will provide an assessment of the non-cash payment industry in the Philippines. It will argue that while structural challenges have spurred the country's most cutting-edge cashless initiatives, they have simultaneously impeded the full integration of cashless transactions into Philippine society. The Philippines will only achieve its goal to transition to a "cash-lite" country if the central bank, Bangko Sentral ng Pilipinas (BSP), and the private sector are able to coordinate efforts to address the financial system's limitations.
Keywords: Cashless payments, financial inclusion, mobile banking, financial cards, the Philippines.
1. Introduction
The Philippines has seen an upward surge in cashless transactions in recent years. This is due to a myriad of reasons including the growing affluence of its citizenry, its vibrant tourist industry, and the increasing popularity of online shopping among young, urban Filipinos.
However, it is the unique structure of the Philippine economy, namely poor financial inclusion coupled with a heavy dependence on remittances that first spurred the country's most cutting-edge innovations in cashless payments. Uneven access to banks throughout the Philippine archipelago, which consists of about 2,000 inhabited islands, has created sharp divisions between urban and rural provision of financial services. The World Bank estimates that only about 42 per cent of Filipinos have a formal bank account (Table 1). Cashless payment systems have the potential to break down financial barriers within the archipelago as well as transfer money across international borders to the most inaccessible areas of the Philippines.
After India and China, the Philippines is reported to receive the highest amount of remittances internationally (Torres 2015). BSP (2016) statistics show that in 2015 the Philippines received US$25.8 billion in cash remittances, which accounted for about 10 per cent of the country's GDP. Around 38 per cent of Filipino adults receive remittances from a family member living abroad, 95.9 per cent of whom used the remittances to purchase food and other household needs in 2015 (BSP 2015b). Poor accessibility to banks in rural areas means that cashless technologies are integral to...