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Asia Briefing

The Philippines Works Toward National e-Payment System

EPaymentsWith the largest English-speaking population in Southeast Asia, Facebook’s eighth-largest member base, and a 531% growth in Internet penetration since 2010, the Philippines boasts a substantial social media market. However, despite increased Internet usage, the nation currently lacks a national e-payment platform. The absence of a uniform e-payment system has stunted the development of the country’s e-commerce market in recent years, and the government is hoping to transform the Philippines from a primarily cash-based society into an e-payment-platform consumer base.

New e-Payment System

Currently, more than 98% of all transactions within the Philippines are made in cash. The Philippines’ government has compared the nation’s high cash usage frequency to nations such as the United States and Australia (which rely on cash for only 57% and 61% of all transactions, respectively) to illustrate the need to establish an online system. In order to reduce its own dependence on cash transactions, the Philippines pledged in early 2015 to transform its economy from a cash-heavy to a “cash-lite” society within the next 20 years. To accomplish this goal, the government plans to establish a national online payment platform capable of managing business-to-business, business-to-consumer, and consumer-to-consumer transactions.

The Philippines has partnered with the United States Agency for International Development (USAID) in the hopes of creating a nationwide e-payment system by 2018. Once established, the platform will replace any currently existing small-scale e-payment platforms across the country.

The United States and the Philippines are negotiating the specific design aspects of the platform but have discussed plans to potentially mirror South Korea’s e-payment platform model, which would allow Filipino users to withdraw from banks and trade stocks and bonds in addition to typical transaction activities.

According to USAID estimates, a national e-payment system will lower transaction costs in the Philippines by as much as 90%.

In addition to establishing a national e-payment platform, USAID partnered with the city government of Batangas last year to instate an online tax-paying system through mobile phone. Since its launch, the system has accumulated more than 4,000 members, and USAID has announced its intention to expand the scope of similar projects in coming years.

Benefits of an e-Payment System

Establishing a national e-payment system is likely to bring significant benefits to both the Philippines’ domestic and global markets. In the past five years, non-cash payment methods have increased by 7.1% globally and by a striking average of 16.1% among developing nations.

USAID predicts that a shift to an e-payment platform not only will increase financial transparency of both customers and businesses but also allow the nation to increasingly engage with the global market. The Philippines’ relatively high Internet penetration rate is expected to surpass 50% of the population by 2017. This compares to a current Internet penetration rate of 25% and 28% of its Cambodian and Indonesian neighbors, respectively.

However, the Philippines’ lower socioeconomic classes often lack access to online financial and transaction systems, rendering them unable to interact directly with the global market. Currently, only 26% of Filipinos can access formal financial channels, either online or offline, and 610 of the nation’s 1,635 municipalities do not have banks. Additionally, roughly 50%  of all mobile phone users prefer to hold their savings solely in personal cash reserves instead of in banking institutions.

The government hopes that a uniform e-payment system will encourage its citizens not only to take advantage of online banking but also to conduct transactions across a larger-scale market. USAID has anticipated that the Philippines will experience a 0.5% growth in consumer spending for each 10% increase in electronic payments.

Challenges to Platform Development  

Despite anticipated financial benefits on an individual level and for the national economy as a whole, the Philippines still faces numerous challenges in the establishment of an e-payment system. According to USAID, the primary difficulty facing the nation will be to either integrate the multiple private e-payment platforms into a national system or devise a national platform to replace all existing models.

In addition to logistical difficulties, the Philippines’ consumer base is wary of a dependence on an independent online agency method of banking. Of the 40% of Filipinos with savings, more than 68% of them keep their money at home rather than in a bank. Moreover, lending is typically established on a personal basis, often with high interest rates.

In order to promote consumer usage of e-payment systems, President Benigno Aquino III announced in early 2015 his plans to purchase all governmental medical supplies, meals, transportation, air tickets, and construction materials through non-cash payment methods. Additionally, the nation has paid all government salaries, welfare stipends, and pensions through online accounts.

State of the e-Commerce Market

In addition to promoting a national online payment system, the Philippines also has sought to develop its e-commerce market. The nation currently has a 41% Internet penetration rate, with more than 60% of Internet users under the age of 30.

E-commerce business-to-consumer transactions within the Philippines are divided evenly between travel-related and non-travel-related services or products. Among non-travel-related transactions, online retail, online financial services, and digital downloads comprise the majority of e-commerce purchases.

With the development of both its online payment system and e-commerce market, the Philippines presents numerous opportunities for foreign investors. Due to the size of its English-speaking consumer base, Western companies have gained a significant foothold in the market without requiring a physical local presence. For example, Amazon ranks among the nation’s top 20 most frequently visited sites without occupying a branch office in the country. 

By the end of 2015, the nation’s e-commerce market is predicted to reach more than USD two billion, a 100% increase from the year prior. Over the course of 2013 to 2018, the industry is expected to grow by nearly 190%.

Looking Ahead

Establishing a uniform e-payment platform within the Philippines not only will affect local businesses but also the global market as a whole, particularly within the Association of Southeast Asian Nations (ASEAN) region. The Philippines is in discussions with other ASEAN nations to establish a transnational ASEAN ATM system that will reduce complications in both trade and travel throughout the region. With the addition of a standard online transaction system, foreign investors and local businesses alike will have greater access to both the Philippines’ and the ASEAN region’s massive online consumer bases. 


Since its establishment in 1992, Dezan Shira & Associates has been guiding American investors through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, including liaison offices in Boston and Waltham specifically established to support our American clients, we are your reliable partner for business expansion in Asia and beyond. For inquiries, please email us at [email protected]. Further information about our firm and how we can support American investors in Asia, please visit our North American Desk.