First community to use ID for cashless payment may inspire the rest of the Philippines

13, Jan. 2021

Veronica Basa, Namayan village personnel, using a payment kiosk in the head office of Namayan village in Mandaluyong city within the capital Metro Manila.(NNA)
Veronica Basa, Namayan village personnel, using a payment kiosk in the head office of Namayan village in Mandaluyong city within the capital Metro Manila.(NNA)

By Darlene Basingan

MANILA, NNA - Persuading cash-loving Filipinos to go cashless has been an uphill task for years.

But a brilliant idea to combine an identification card with a debit payment card in a project in one well-managed community in capital Metro Manila might encourage the rest of the Philippines to adopt digital payment.

PayMaya, a leading e-payment platform, which is a subsidiary of leading telco player Philippine Long Distance Telephone Co.(PLDT), has collaborated with the local authority of Namayan, an inner suburb within Mandaluyong City, to create the first ‘cash-lite’ community in the archipelago.

With a population of about 7,000 or equivalent to Philippine definition of a 'Barangay' or village, the Namayan administration has been issuing new secondary IDs to residents since late October.

Linked to their smartphones, the cards can be used for contact-free payment when they shop at stores or use games courts and gyms within their neighborhood. They can also use it to make a fund transfer or an online payment. Alternatively, they can do all these transactions using the PayMaya app on their mobile phone.

From 2021, municipal employees will receive their salary via their PayMaya-powered ID card, which is seen as a more secure and efficient method compared to the tedious practice of manual disbursement of cash currently.

In addition, micro, small and medium enterprises in Namayan can use the PayMaya Negosyo, a merchant app to accept cashless payments via PayMaya QR codes in stores, besides other contactless fund transfer methods like PayMaya Send Money and Bank Transfers online.

The Namayan ID card, which shows the photo of the holder, serves as a secondary ID. Although it might not be accepted by banks for account opening, it has also enabled the unbanked in the community to leapfrog into digital banking without the need to open a bank account under the traditional system.

Philippine banks usually require account applicants to produce at least two valid or primary identity cards for verification. However, millions of Filipinos still lack such official documents, according to the National Economic and Development Authority.

Veronica Basa, a 39-year-old worker, who does not have a bank account, plans to deposit money in her new Namayan ID card when she receives her pay this month.

She said, "I actually don’t have a bank account. This card will serve as my bank account for now.”

Victor Emmanuel S. Francisco, Jr., Namayan community chairman, said the ID project came at the right time when pandemic lockdowns have restricted the movements of people.

Encouraging people to adopt contact-free transaction methods and go digital in other ways has become not only important but also urgent as Filipinos struggle to stay safe as the coronavirus pandemic continues to plague the country.

"By encouraging the use of cashless technologies in everyday transactions in our barangay, we are building a safer and more inclusive community,” said Francisco, adding that the idea for Namayan to go cashless came up in 2018.

PayMaya, which offers a slew of fintech solutions, also provides electronic payment services for a total of 60 government and local government departments.

“Our project with Barangay Namayan is an encouraging breakthrough at the grassroots level,” Shailesh Baidwan, president of PayMaya, told NNA.

The success in Namayan, highlighted by the media, is now being watched by the rest of Mandaluyong City and other regions. There is talk that the program might be extended to other parts of the city.

Baidwan said an increasing number of local governments are planning digital transformation as the national government is growing a digital economy by promoting widespread use of digital payments.

The Philippines has recently approved digital banks to operate in the country to expand digital financial services, which have seen a huge surge across Southeast Asia during the pandemic.

Online banking will boost financial inclusion for the large numbers of unbanked people in the country. It will also enable people to have faster access to goods and services especially when their movements are restricted.

In fact, the city of Manila rolled out a similar ID-payment card scheme to serve the elderly and people with disabilities in February.

With shutdown curbs on movements and business operations, the card with app connection is a boon to those who need supply of essential items but could not move around so easily and freely. The fear of catching a COVID-19 infection also prevented them from going out and using cash.

The national government, which is digitalizing its administrative services, is currently implementing a national ID program. It will help most low-income earners, who do not hold valid identification papers, to open a bank account easily.

The government has been distributing money aid in cash manually to pandemic-affected families as many do not have bank accounts. There are now proposals for additional aid, but the good thing for Namayan residents is that any future cash assistance will be transferred to their ID cards, said chairman Francisco.

Bain & Company, a US consulting firm, has predicted that the Philippine digital economy will grow by 30 percent by 2025 in a study done together with Google and Temasek Holdings. Bain foresees more widespread adoption of digital financial services among consumers and small and medium enterprises.

In July, President Rodrigo Duterte vowed to have a “paperless government” as he urged state agencies to go digital. The government will also embark on a national broadband plan to improve communication.

However, growing incidents of data theft, loss of privacy and hacking have called for the need for enhanced data protection and cybersecurity.

In the Philippines, where communication infrastructures are fragile and vulnerable to hacking, risks of data theft are high.

Gerald Wang, head for Asia-Pacific region of US market research firm IDC, noted that cyber-attacks have become inevitable amid increasing digitalization. He called on the government to install security solutions to help recover any hacked or stolen data.

“When you talk about recovery, it is not just the technical recovery. It is a financial recovery. It is a reputational recovery. It is a legal recovery,” he stressed.

Agreeing, Andres Jomas Capellan, head of security services sales at IBM Philippines, said, "Personal information is considered by hackers as a very valuable currency. As such, steps must be taken to protect government websites.”

Today, many Filipinos still prefer to use cash rather than electronic payments. But ever since the pandemic stalled the economy this year, e-payments in the Philippines have surged significantly.

But in order to build trust in a cashless society, it is necessary for local governments to be transparent in the way they handle personal information of residents, which until now, seems to be inadequately managed, said observers.