Despite the boom in digital payments in the Philippines due to Covid-19, the country is still lagging behind its neighbors in the Southeast Asia region in terms of adoption of electronic money or e-wallet.
According to S&P Global Market Intelligence’s latest Southeast Asia E-Money Market Report, e-money payments in the region, excluding the Philippines, grew to $26 billion in 2019 from $15 billion in 2018.
Indonesia surpassed Thailand as the largest e-money market in the region, registering $10 billion in payments. Thailand’s e-money payments stood at $9 billion, Malaysia handled $4 billion, and Singapore processed $2 billion.
The study showed that the primary instrument of cashless payments for everyday transactions in Southeast Asia is e-money, which refers to prepaid monetary value stored and transferred electronically using cards or e-wallets.
The report looked at the usage of three popular retail payment instruments in the region: debit and credit cards; e-money comprising reloadable prepaid cards and digital wallets; and real-time interbank transfers.
The research noted that it was only in the Philippines where banks held more e-money licenses than non-banks, although the gap between banks and non-banks is rapidly shrinking.
Since October 2019, the number of non-banks issuing e-money grew to 24 from 14 in the Philippines, while that count for banks fell to 27 from 30, the study noted.
On the other hand, non-banks accounted for most e-money license holders in Indonesia, Malaysia, and Thailand, primarily offering e-wallets.
The report said popular technology firms with varied business interests in the region are investing in e-wallets, noting that the low penetration of traditional cashless instruments has made it imperative for firms to provide consumers with access to a viable instrument to perform digital transactions.
Grab Holdings, Sea Ltd., and Ant Group are among the e-money companies with the largest geographical footprint, offering payments in at least six countries in Southeast Asia. In the Philippines, the list of e-payment providers includes PayMaya, GCash, and Coins.ph.
The study observed that the rise of digital payments in the region coincided with the consumption of online services such as ride-hailing and ecommerce.
“Unlike in the US where payments-focused technology firms such as PayPal and Square are becoming gateways to online and offline commerce, payment processing in the Southeast Asian region is largely an extension of ride-hailing, e-commerce and other digital services. Large ride-hailers and e-commerce firms in the region function like financial technology companies,” it said.
“For technology firms, e-money provides an attractive entry point into financial services without the burden of bank-like regulations. The dominance of non-banks as e-money issuers across the region makes e-money a good proxy for fintech payments.”
The report also noted that banks are losing clout in e-money amid the growing popularity of mobile services offered by technology firms. The shrinking space for banks in e-money may also be driven by a shift in consumer banking toward promoting higher margin products such as credit cards, it said.