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E-wallet and other mobile payment apps are ubiquitous in the Philippines, a product of underbanking, the pandemic and a youth-driven economy. Photo by Nika Cataldo | Banker & Tradesman Staff
MANILA, PHILIPPINES – I was still feeling a bit dizzy after a tiring 28-hour journey halfway across the world when Manila’s mid-80 degree humidity wrapped itself around my face as my husband and I stepped from our plane.
I sleepily pulled out my Philippine mobile phone and opened GCash, an app I always use here. I moved 5,000 pesos – roughly 90 US dollars – from my PayPal account to GCash, and in a split second, the amount reflected on my e-wallet.
Using the same app, I transferred 2,000 pesos to my Grab account, the equivalent of Uber here. I received a one-time code in a text to my cell phone number, entered the code on the app and confirmed the transfer, which came with only a 15 peso convenience fee.
While waiting for our checked baggage, I realized I needed to call my parents so they knew we had landed. I clicked on GCash again and bought a prepaid plan for calls, texts and mobile data.
Those three transactions all happened in one minute. In another time, I would have groggily run around the airport and looked for my parents, an ATM for international cards, or a foreign exchange counter. Thank goodness for GCash!
Instead, all we had to do was gather our luggage and hug my parents before leaving the terminal.
I got a glimpse of the foreign exchange counter as we walked out the door.
In America, I need multiple apps to meet my various financial needs, and it all feels segregated. I have my credit union’s app for my debit card and checking and savings accounts; the Discovery app for my prepaid credit card so I can build up my credit score; Credit Karma to track that credit score; the Mint app to track my finances; Google Pay for contactless payments; and WorldRemit and PayPal to send money to my family in the Philippines.
I hadn’t just traveled to the other side of the globe for my wedding celebration. I’d also returned to a completely different way of banking – one that many of the Massachusetts banks and credit unions I cover are still a long way from implementing.
The All-in-One Life
As a Millennial born and raised in the Philippines, I am used to relying on my phone and its all-in-one mobile apps and e-wallets to make almost all of my financial transactions in a day.
I do not remember going to a physical bank branch in my last five years in the country, and the last time I held a check was pay day at my part-time college job at Krispy Kreme.
Before coming to the United States in 2021 – especially during the first years of the COVID pandemic – almost all of my transactions were made through my phone or laptop, anytime and anywhere, with the exception of withdrawing money from ATMs and cash-based foreign exchanges.
I remember purposely not withdrawing cash or forgetting my wallet at home and only bringing my phone when I left the house, and I could still make it through the day.
Through an e-wallet, I could pay for things I bought from street vendors, local farmers markets, grocery stores and malls, and pay for public transportation. I could transfer money to co-workers for a shared restaurant bill or pay the actual restaurant using a QR code – even borrow up to 5,000 pesos instantly in case I was short before payday comes.
Leading e-wallet apps also partnered with a multitude of companies to offer in-app banking, lending, in-app credit scoring, domestic and international remittances, cross-border payments and money transfers, utility bill payment, in-app insurance plans (from life and health insurance to car or property coverage), the purchase of credits for online games, video streaming services and cable or internet services. Some even included in-app shopping and at-home delivery.
Customers at many shops across the Philippines pay through a nationally-standardized QR code system linked to their mobile wallet app. Photo by Nika Cataldo | Banker & Tradesman Staff
How E-Wallets Started in the Philippines
Compared to the US with a mobile plan system and transparent credit scoring, the Philippines is a prepaid country and most Filipinos were and are still unbanked due to the stringent criteria local banks maintain to open accounts and apply for credit cards. People rely on cell phone numbers to be their account numbers.
For decades, tens of millions of Filipinos have also worked overseas and sent money back home. One of the easiest ways to get those remittances in the pre-smartphone era, especially for those living in rural areas, was through a money transfer using text messages, and remittances remain one of the main drivers of mobile banking uptake here.
From a nation that was 80 percent unbanked in 2001, only 44 percent of Filipinos are now without a bank account, as of 2021 data of the Bangko Sentral ng Pilipinas (BSP), the country’s central bank. The financial technology revolution in the Philippines has been largely supported by the government through its National Retail Payments System (NRPS) Framework.
Under the NRPS, the BSP granted digital banking licenses, came up with a national QR code system – which removes exclusivity for QR codes and for different apps to be able to scan them. This enabled the launching of real-time payments systems such as PESONet and InstaPay. These payment rails charge 15 peso conveniences fee per transaction between different banks.
Some expertise came from abroad, too. The two main ewallets in the Philippines, GCash and Maya, are also partly owned by fintech giants in China. Mynt, the company behind GCash, is 40 percent owned by Jack Ma’s Ant Financial, known for its Alipay app. Tencent Holdings, known for its WeChat app, has a minority stake in Voyager, the owner of Maya.
“The capital, Manila, suffers from congestion and horrendous traffic, and in rural areas, bank branches are situated sparsely in the city centers. People are so busy making a living that they don’t have time to go to banks, queue and have the majority of their day taken up by a single bank transaction. The public prefers online and mobile banking, even when it comes with convenience fees,” Lorenz Marasigan, a financial technology journalist for business broadsheet BusinessMirror, said.
A good friend of mine, Lorenz shared that young Filipinos like us contributed to quick fintech adoption among consumers and businesses. We tend to have the latest smartphones, order items online and are generally looking for more convenience. There are also a lot of us. In 2020, 29 percent of the country was between 15 and 30 years old, according to the Philippine Statistics Authority. In the United States, by comparison, that figure is 20 percent according to the U.S. Census Bureau.
But the astronomical rise of digital banking and transactions, he said, came during the pandemic when people stayed in their homes, only had limited mobility and leaned on online shopping, bills payment and other similar services.
“The financial support of the government at that time, which was like the stimulus in the US, was processed through GCash and Maya. It forced Filipinos to get an account,” Lorenz said.
Even the traditional big banks and rural banks are catching up and launching their own digital banking platforms as more neobanks, or digital banks that do not have branches, are coming up and applying for digital banking licenses with the BSP, he said.
U.S. Consumers’ Fintech Struggles
When I first emigrated, I really missed using GCash or something like it.
I did not have a credit score yet – ergo no credit card (or car) – making it hard to even book a Lyft or load my bus card to leave our apartment, or order food for delivery. There were no easy-to-use interconnected apps like GCash and Grab, and I had to rely on either cash or my husband’s credit card.
At one point, I tried to see if Venmo could fill the big, hole in my heart shaped like a convenient all-in-one mobile banking app. I found it hard to navigate the app and connect my debit card to the Venmo account. Then, suddenly, I was greeted by a request for permission to use a third-party service called Plaid, the middleman software many popular financial apps like Venmo use to connect with each other.
Nika Cataldo
I didn’t know what it was for at the time, and it turned me off.
I was, in a way, scared of using it due to the disclaimer and permissions, as if it was dangerous to use Plaid’s services. It also did not feel natural with all the steps I needed to take to connect my bank account to Venmo – a big contrast with linking my PayPal account to GCash.
Americans use credit cards a lot, and it can be hard to keep track of your spending if you have multiple cards on different apps. Some people still drive to bank branches to cash checks or physically mail them to send money to loved ones, who then wait days for that piece of paper to arrive, around the same time it takes for some transactions to clear.
When I told Allison Barbosa of these concerns, she understood my culture shock and pain. She is currently the head of Americas at cross-border financial market infrastructure firm RTGS.Global, but she previously worked for British multinational bank Standard Chartered and covered Southeast Asian markets like Singapore, Malaysia and the Philippines.
She said the lack of a holistic and integrated financial services app in the U.S. can be attributed to the different, independent pieces of bank infrastructure across the country.
“It is interesting that this happens in Asia, and I think this is because they are smaller countries that can bring the banks together quicker that can work with other countries to really focus on doing domestic and cross-border transactions,” Barbosa said.
Given the large number and size of banks and the size of the banking industry in the U.S., she said, the country will likely continue to see slow progress in fintech adoption. She said she once expected checks to be “a thing of the past,” but 55 million Americans still used checks in 2022.
“But it’s not to say that the U.S. does not have it as part of its priorities going forward. I think it will take a little bit more time to get to where Asia has been able to accelerate in that regard,” Allison said.
Mass. Fintechs Focused Differently
But while the fintech market in Massachusetts – and the U.S. in general – may be growing slower than in the Philippines’ newly digitized economy, that doesn’t mean big shifts aren’t happening under the surface, said Mass Fintech Hub program director Elizabeth Thomas. Local fintech firms’ business models lean more towards providing underlying support for the banking and finance sector than the visible disruption in payments and lending like what happened in the Philippines.
“The Massachusetts fintechs are also supporting the broader financial system through infrastructure solutions and have grown significantly in other consumer areas of financial services such as in wealth management, insurtech [insurance technology], real estate, benefits and more. They are using and developing tools, such as artificial intelligence and digital identity solutions, to further increase their utility and security for customers,” Thomas said in an email.
Being a mature market, she said, the U.S. may still continue using legacy systems such as physical checks but Massachusetts-based banks are working with fintech companies to continuously enhance their mobile and online banking platforms. Thomas cited examples like Boston’s Berkshire Bank improving its digital platforms and Rhode Island’s Citizens Bank putting up more interactive teller machines, also known as video-assisted ATMs, to complement a larger drive to adopt innovative technologies.
I know Massachusetts and the Philippines are very different countries with different values, economies and histories. But as I contemplate getting back on the plane to Boston in a few weeks, I’m still left wondering: Will I ever be able to find my American banking super app?
