Friday, May 24, 2024

BLOG | Bridging the trust gap in digital payments and e-commerce in PH

In the 25 years since the world’s first online transaction, e-commerce has become increasingly embedded into our everyday lives. We have come a long way from the time when only academics used the Internet and we shopped at the mall.

Trust is the necessary foundation for all human exchanges, whether in the real world or online. E-commerce in the early days required solving the fundamental challenge of trust of long-distance commerce between strangers using a new technology.

In response to the challenge, policymakers, business leaders, and technologists made intentional decisions to make e-commerce infrastructure trustworthy.

For the Philippines, a nation that is projected to grow its e-commerce market from $1.5 billion in 2018 to $10 billion by 2025, this collaboration to build and strengthen the trustworthiness in the e-commerce ecosystem will be increasingly important.

The digital opportunity

The very first precursor to e-commerce is of course Internet connectivity. And in emerging markets, slow connectivity has been the primary barrier to adoption. But things are looking up, because while the Philippines has one of the slowest Internet connection speeds worldwide, a recent report shows that the country has improved its fixed broadband speed by almost 144 percent in the last two and a half years. Both public and private stakeholders in the Philippines are also aiming to boost Internet access quality with the introduction of a third major telco player.

The improvement in connectivity, as well as the accessibility of mobile, has effectively lowered the threshold of e-commerce adoption. In the past, mention of e-commerce referred to purchases made on a computer or laptop; in emerging markets like the Philippines, online purchases are made primarily on a mobile device.

Another key driver for e-commerce adoption in the Philippines is social media. Dubbed the social media capital of the world, there are now 76 million social media users in the Philippines. With 99 percent social media penetration, Facebook and Instagram are becoming gateways to e-commerce as they evolve to become digital marketplaces.

Building a trustworthy payments ecosystem

In the United States, e-commerce started taking off after credit card information could be successfully encrypted. That sense of security was critical for making e-commerce trustworthy for consumers.

That’s not the case in the Philippines. While Filipinos spend over nine hours a day online, a large segment of the population remains unbanked. In fact, only 22.6 percent of Filipinos had a formal financial account in 2017. The lack of credit or debit cards has meant a slower penetration rate for online payments, which was linked to the success of e-commerce in the early days.  

What Filipino entrepreneurs did to spur the uptake of online commerce locally was to marry two foundational pillars – namely payments and logistics – and layer it atop a solid internet infrastructure to transform how Filipinos buy and sell.

Welcome to cash-on-delivery (COD), a futuristic innovation as old as commerce itself. It is an old commercial practice reimagined for a new digital economy. Cash on delivery became an integral system in markets where secure online payments were not the norm. It has become a key part of building consumers’ trust in digital businesses.

The Philippines’ rating increased by eight notches in the Global Fintech Index 2020, a global benchmark of fintech activity. This speaks to the local market’s potential for finance-related platforms.

As more and more Filipinos gain access to financial services that they didn’t have before, e-commerce is expected to grow further. After all, e-commerce and digital financial systems are inherently intertwined. The opportunity to grow is for both e-commerce and digital payments.

Trust in the future

Similar to 1994, there are opportunities today for ecosystem players to protect and elevate trust in the ecommerce infrastructure. The question for e-commerce in the future is no longer what the technology is, but rather how we choose to design and deploy technologies, such as artificial intelligence, in a trustworthy fashion. 

The Phillipines will no doubt be a fascinating growth market for e-commerce and will leverage unique technological, business, and policy solutions to build and increase trust into the e-commerce ecosystem.

The “History of E-commerce” podcast is available on Spotify or Apple. Learn from over 100 business pioneers, technologists, and policy-makers about the technology, business, and policy decisions, and innovations that have created a trustworthy e-commerce infrastructure over the past 25 years.

The author is head of enterprise sales for Southeast Asia at PayPal


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