Credit Card Usage and Alternative Payment Instruments in the Philippines

The payments market in the Philippines has grown rapidly in recent years, with credit card penetration gradually increasing, but cash and alternative payment instruments still dominate. A detailed analysis is provided below:

One,Current status of credit card usage

1. Low penetration but fast growth

   • Around 5%-10% of adults have a credit card (2023 data), much lower than in neighbouring Southeast Asian countries (e.g. Singapore 60%+).
   • Growth drivers: expanding middle class, banks promoting annual fee-free cards, rising e-commerce demand.

2. Major card issuers

   • local bank: BDO Unibank (highest market share), Metrobank, BPI.
   • international brand: Visa and Mastercard are predominant, with American Express limited to high-end users.

3. Restricted usage scenarios

   • It is mainly used in large shopping malls, chain shops, online travel bookings (e.g. Agoda) and international e-commerce platforms (e.g. Lazada/Shopee cross-border payments).
   • Low acceptance by small and medium-sized merchants due to high processing fees (2%-4%) and the need for POS terminals.

Two,The Rise of Alternative Payment Instruments

1. Explosive growth of e-wallets

   • GCash(under Globe Telecom): over 51 million subscribers (by 2023), with support for code-swipe payments, money transfers and even investments.
   • Maya(formerly PayMaya): integrated e-wallet and virtual banking service with over 48 million users.

2. Popularisation of bank transfers and QR code payments

   • InstaPay (real-time microtransfers)
   • PESONet (bulk clearing of large amounts)
   • QR Ph - National standardised QR code system for payment between different platforms

3. OTC Offline Cash Recharge
   Topping up e-wallets with cash through convenience stores like 7-11 remains an important channel

4.BNPL buy now, pay later on the rise
Atome and BillEase, among others, allow instalment payments to attract the card-less crowd

III. Key challenges
Infrastructure differences:: Wide gap in acceptance between metropolitan and non-metropolitan areas
confidence issue:: Part of the population still prefers "visible" cash transactions
regulatory framework:: Central banks (BSPs) actively promote digitalisation but need to balance innovation and risk

Forecast of future trends.

• BSP aims to digitise 50% transactions by 2025
• "Super App" model integrates more financial services (e.g. GCash already offers insurance and microfinance)
• CBDC (digital peso) may enter pilot phase

IV. Future trends in the Philippine payments market (continued)

1. Accelerated integration of the Super App ecosystem

• GCash and Maya It has been upgraded from a mere payment tool to a "financial super-application" that provides..:
  • Microfinance (GCash GLoan, Maya Credit)
  • Insurance products (e.g. GCash Insure)
  • Investment services (e.g. GInvest Money Fund)
• telco-led model: Globe (GCash) and PLDT/Smart (Maya) are leveraging a large user base to drive financial services downstream.

2. Explosive growth of BNPL (buy now pay later)

• Platforms such as Atome, BillEase, Tendo etc. are witnessing rapid penetration in the e-commerce scenario and attracting young consumers in particular.Shopee/Lazada have inbuilt BNPL option.
• Regulatory Focus: The BSP is likely to tighten interest rate and risk control regulations on BNPL to avoid excessive lending risks.

3. CBDC (Central Bank Digital Currency) trial advances

• The BSP is launching a "digital peso" research project in 2023, with plans to test wholesale CBDCs (interbank settlement preferred) in a phased manner. There is no clear timeline for retail CBDC. Potential advantages include lower remittance costs and greater financial inclusion.

V. Market segmentation opportunities and challenges

VI. Recommendations for entry of international enterprises

1. Co-operation is better than competition: Joint ventures with local giants (e.g. Ant Group's shareholding in GCash's parent company Mynt)
2. Hybrid payment programmeSupport credit card + e-wallet + OTC cash recharge at the same time
3. Compliance first::
   - BSP Requires Foreign Payment Institutions to Apply for EMI Licence (E-money Issuer)
   - Data privacy laws (GDPR-like) limit how user data can be used

Typical cases.

• GrabPay enables wallet interchange through partnership with local banks
• Doku (Indonesian payment gateway) uses the Philippines to enter the Southeast Asian market

VII. [Key projections]
✓ E-wallet transactions to overtake credit cards by 2025
✓ BNPL market size maintains annual growth rate of 40%+ (currently ~$500M)
✓ RBI may force large merchants to accept at least 2 digital payment methods

Need to dive deeper into data or case studies in a particular direction? For example, a comparison of acquiring rates in a specific city, or details of an innovative product from a particular bank?

VIII. In-depth Insights and Strategic Recommendations for the Philippine Payments Market

1. Structural opportunities in the credit card market

Despite low penetration, credit cards remain irreplaceable in specific scenarios:

• high-end consumer market: High-end hotels and international brand shops in Manila's CBD (e.g. BGC, Makati) are still dominated by credit cards.
• International travel and cross-border e-commerce: Visa/Mastercard's global network has obvious advantages and is particularly suitable for cross-border online shopping (e.g. Amazon, Shein).
• Bank Incentive Strategies: Local banks stimulate the opening of the card by:
  • Zero annual fee + cashback on first swipe(e.g. BPI Blue Mastercard with liberal annual fee waiver conditions)
  • Instalment Rate Offer(0% interest for 3 instalments on selected cards)

Challenge Response Programme::

• Virtual Card Promotion: Security Bank and others have introduced a one-time virtual card number feature to reduce the risk of skimming.
• BNPL Co-branded Card(in pilot): Allow users with insufficient credit history to obtain a quasi-credit line through e-wallet spending data.

2. Analysis of key points in the "war of sinking" for e-wallets

GCash's competitive focus with Maya has shifted to Tier 2 and Tier 3 cities and rural areas, with core strategies including.

potential game changer::

• Coins.ph (focuses on cryptocurrency exchange, favoured by Web3 users)
• Overseas Filipino Bank (OFBank) digital bank could cut into the labour remittance scene.

3. BSP regulatory developments and corporate compliance red lines

Policy changes to focus on in 2024:

1. Digital Banking Capital Requirements: Minimum registered capital may be raised from P100 million to P500 million pesos (about TP4T9 million), possibly eliminating small and medium-sized players.
2. Anti-Money Laundering Escalation::
   • E-wallet transactions exceeding P50,000 (approx. $900) in a single day require additional authentication
   • BNPL platform to be included in credit data sharing system
3. QR code interconnection::
   Mandatory access to QR Ph standard for all payment service providers until the end of 2024

IX. [Practical case] Payment enterprise success path dismantling

Case 1: How GrabPay Bucked the Trend in the Philippines

- Phase I(2018): Focusing on the Rigid Payment Needs of the Online Car Rental Scene
- Phase II(2020): Tie-up with GrabFood takeaway to form a closed eco-loop
- Phase III(2022): Open API for third party access such as SM Supermarkets

Key decisions.
✓ Refuse to blindly burn money to subsidise, choose high-frequency scenes of natural inflow
✓ Early acceptance of mixed cash payments builds habits

Case2: PayMaya → Maya's Rebranding Insights

Original pain point: regarded as "prepaid card tool", lack of financial attributes
Transformative actions.
① Name change and integration of bank deposit/fund functions in 2022
②Launched the merchant acquiring hardware "Maya Terminal" (the rate is only 1.5%).
③Sponsorship of Philippine Men's Basketball Team Enhances National Brand Awareness

Effect:The number of merchants increased by 300% to 800,000+ in six months.

X. Observations of emerging technology test beds

1. Blockchain remittances:
   • SBI Remit Reduces Japan-Philippines Money Transfer Time to <30 Seconds with RippleNet
   • GCash Tests USDC Stablecoin Transfers (Limited by BSP's Cautious Attitude)
2. AI Risk Control Applications
   Home Credit uses non-traditional data (mobile phone battery/semantic analysis of repayment text messages) to approve small loans

XI. The Ultimate Torture - Will Cash Be Eliminated?
Short-term (Within 3 years) The answer is no.
- cultural factor :: Crisp money tradition is deeply entrenched.
- economic reality :: 60% labourers nationwide are in informal employment (no regular wage stream)

But the signal for a turnaround is here.
✅ Govt plans to impose 3% tax rate on >P500k cash transactions (BIR proposal stage)
✅Major malls start charging surcharge for cash handling

Recommended Directions for Further Exploration.
🔍 Comparison of Regional Payment Habit Differences in Manila vs. Davao City
💡 How to design a cross-border collection solution for KOL netizens?
📊Innovative models of credit for micro and small enterprises in the framework of Open Finance