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An improvement in the domestic payment channels may help boost remittance inflows to the Philippines as this will help promote financial inclusion and reduce reliance on cash, a study by the Asian Development Bank (ADB) showed in a report by Philippine Star.
“In the Philippines, a key lesson is that by improving the domestic payments environment, international remittances can benefit. More broadly, better domestic payment systems can encourage more people to obtain accounts and become ‘financially included,’ removing their need to receive money in cash,” the ADB said in a study: “Harnessing Digitization for Remittances in Asia and the Pacific.”
Better domestic payment systems can also help accelerate the remittance process and reduce costs for overseas Filipinos.
“The importance of digitization to addressing many of the challenges with remittances cannot be overstated. When properly deployed they help reduce the price of remittances, increase access for consumers, address gender issues, improve settlement, optimize operations, provide valuable data, and many other benefits,” the multilateral lender said.
The Philippines is the third-largest recipient of remittances in Asia with more than $30 billion inflows received in 2018, trailing behind China and India.
However, cash remains king in the Philippines. A survey showed 70% of local respondents said they still prefer cash transactions, claiming that this gives them greater control over their finances. They also added it is easier to trust a person than a digital device.
Money sent home from Filipinos abroad increased for the fourth straight month in May to $2.382 billion, up 13% year on year. This was the fastest uptick in nearly five years according to central bank data.
To date, cash remittances grew by 6.3% to $12.28 billion.
The ADB noted the country’s efforts to boost payment digitization, with the Bangko Sentral ng Pilipinas (BSP) targeting to increase the share of digital payments to 50% of all payments and expand financial inclusion to 70% by 2023.
As of 2017, only 34% of adult Filipinos have a bank account.
The national ID system and the standardized QR code scheme will also help the BSP achieve its targets much faster.
The BSP started seeing more Filipinos using digital payments last year as the coronavirus disease 2019 (COVID-19) pandemic and the lockdown prompted them to adopt contactless transactions.
“The COVID-19 crisis led to an increase in digital transactions, but cash is still predominant. To increase use of digital remittances, a series of recommendations has been developed that could help move people from cash to digital,” ADB said.