Huge surge in e-payments during Philippine lockdown

05, Jun. 2020

The increase in digital transactions during the months-long lockdown in many parts of the Philippines boosts the confidence of the Bangko Sentral ng Pilipinas (BSP) of achieving its goal of having 50 percent of payment transactions shift from cash or checks to digital by 2023.
The increase in digital transactions during the months-long lockdown in many parts of the Philippines boosts the confidence of the Bangko Sentral ng Pilipinas (BSP) of achieving its goal of having 50 percent of payment transactions shift from cash or checks to digital by 2023.

By Darlene Basingan

MANILA, NNA - Before the coronavirus pandemic forced millions of Filipinos to stay indoors, Danica Reyes would usually make payments using cash over the counter just like the majority of Filipinos.

This lessened her worry of having personal information like debit card information being stolen by cybercriminals lurking around vulnerable websites or online applications.

But the lockdown, which forced people to work from home and stay indoors as much as possible to help contain the spread of the coronavirus, has changed her habit. Reyes, who works at an insurance company, now settles all her bills electronically in a flash.

Also, the lockdown had brought public transportation to a standstill. So it was near impossible for her to travel to a place to make a cash payment even if she wanted to.

“I don't have a choice but to pay online,” she said.

It was also the case for many, reported the central bank which noted a huge surge in online transactions beyond the normal pattern.

Bangko Sentral ng Pilipinas (BSP) had said in May that two electronic fund transfer services -- InstaPay and PESONet -- saw a combined increase of 2.13 million transactions or 18 percent growth and 64.62 billion pesos ($1.3 billion) or 25 percent increase in value during the initial 45-day lockdown from mid-March to April 30 compared with the same period in 2019.

Giving an update on Thursday, the bank said it was remarkable that the volume and value of InstaPay and PESONet transactions spiked during the full months of April and May, rising by 84 percent and 24 percent, respectively.

InstaPay is a real-time transfer service which facilitates urgent and small value transactions with a cap of 50,000 pesos per day, while PESONet is for high-value transactions of businesses, government agencies and individuals with no transaction limit.

Both services are also being used by participating banks, e-money issuers or mobile money operators to allow their customers to wire money in Philippine peso.

On Thursday, BSP governor Benjamin Diokno said InstaPay gained traction when people opted for the convenience of settling for goods and services online and remitted small sums of money during the lockdown.

Meanwhile, the use of PESONet for the government’s distribution of social aid during the coronavirus crisis also contributed to the surge in its volume and value, he added.

During the January to May period, InstaPay saw a 57 percent rise in terms of volume, while PESONet grew 325 percent.

In fact, digital transactions in the Philippines have been increasing in recent years, but not as tremendous as during the Enhanced Community Quarantine (ECQ), said the central bank.

“This trend indicates a shift from cash-based transactions to digital payments given the limited physical mobility, shortened operating hours of financial institutions, and the public’s avoidance of face-to-face transactions during the Enhanced Community Quarantine,” the bank said.

Contributing to the sharp rise is the waiver of fees for electronic fund transfers, it added.

InstaPay grew exponentially from a transaction volume of just 1,740 when it was launched in April 2018 to 8.86 million in April 2020. Likewise, the use of PESONet expanded significantly from almost 330,000 transactions in November 2017 to 1.08 million in April 2020.

Having seen such growth momentum, the bank had said in May that it was confident of meeting its goal of achieving 50 percent of payments being shifted from cash or checks to e-mode by 2023.

In May, BSP governor Benjamin E. Diokno said in its statement, “We see the use of digital payments gaining momentum in the post-coronavirus environment as more financial institutions embrace digital transformation to provide more efficient and safer services, while consumers and institutions, including the government, continue enhancing access to digital payment facilities.”

Cyber threats loom over e-transactions

However, the spike in digital transactions has also prompted the central bank to step up measures to protect users from cyber threats that worry many Filipinos like Reyes.

From March 17 to April 30, over 4.1 million digital accounts were opened at banks and non-electronic money issuers, according to data from the central bank.

“With the significant shift to digital financial services, it is critical to be vigilant against fraudsters and cyber criminals who take advantage of this change in consumer behavior,” Diokno said in an online press briefing on Thursday.

BSP warned that these cyber frauds may include donations or charity scams as well as investment and product scams. It also flagged fake or malicious websites and phishing emails.

BSP had reminded financial institutions to install multi-layered security defenses such as authentications to protect users during the pandemic.

The bank also increased surveillance to identify potential threats and would implement counter-measures immediately.

BSP is collaborating with key stakeholders such law enforcement agencies to tackle cybercrime. It has also rolled out an awareness campaign on social media to urge the public to be vigilant.

Melchor T. Plabasan, BSP director for technology risk and innovation supervision department, believes most of the Philippine banks are on track to address cyber threats as they have strengthened their surveillance system.

Banks have been sending emails and embarking on social media campaigns to educate their customers.

Although worried about the potential risks, Reyes said she would be cautious when having to pay bills online pending the discovery of a COVID-19 vaccine.