Thursday, 18 July 2024

How sustainable is the e-wallet business in the Philippines?

5 min read

By Chris Kapfer

With the seemingly accelerating adoption of e-wallets, GCash, PayMaya and Grab vie for a large piece of the e-wallet pie but must first confront issues involving cash-in, activation and economic sustainability to stay in the business.

  • Current e-wallet framework targets the banked population and does not help financial inclusion
  • No clear path to profitability for telco players whose incentive programmes make them burn through huge amount of capital.
  • Grab is rapidly developing its ecosystem but only 25% of all transactions are paid through GrabPay’s cashless services

Since 2018, the mobile wallet war in the Philippines has been heating up with GrabPay entering the fray in May 2018 plus renewed efforts by GCash and PayMaya – the two dominant e-wallets – to introduce QR code payments. GCash further announced in June 2019 that it crossed the 20 million registered users from five million in 2017. More recently, Bangko Sentral ng Pilipinas (BSP) announced, as reported by local media, that e-money accounts rose by 22% to 33 million in 2018. This is composed of five million active e-wallets and 28 million prepaid cards linked to e-money. 

These developments make it appear that the Philippine market is on the verge of accelerated e-cash uptake. However, there are a few issues to keep in mind with this hype on numbers by GCash and to a certain extent, PayMaya, the payments service of Voyager Innovations, PLDT’s digital innovation arm. As of press time, the historical figures cited could not be confirmed by Voyager Innovations to The Asian Banker, as these may refer to different data points that may have changed in recent years, as well as updated user data in 2018.

First, unlike basic and restricted bank accounts which have been introduced a few years ago, e-wallets can be opened conveniently from a mobile phone. The major difference between the restricted or basic account and e-wallet is that these don’t earn interest and are not secured by the Philippine Deposit Insurance Corporation, which, if taken from the point of savings, is counterproductive.

Second, the main issue is not opening the account but how to fund this account from a user’s point of view. Cash-in continues to be the biggest hurdle, which has yet to be solved by GCash and PayMaya. Consumers have to look for cash-in outlets but both have not advertised or announced any cash in location, except from bank accounts. This was made possible with the introduction of national retail payments switch which allowed pure e-wallet players to transfer funds in real time.

E-wallet players continue to target the banked market whereas 60-70% of the adult population continue to be unbanked. The industry has solved the problem of cash in via bank accounts but it has not yet solved the problem of people who do not have a bank account in the first place. And nobody goes to a bank branch to top up, considering the queue and topping up through an ATM means that the customer transacting is “banked”.

GrabPay has created a link for cash in but it is not yet activated. Eventually, Grab may be able to enlist cash in outlets but the question is how fast and how extensive this can be done. PayMaya claims that it has more than 27,000 agents but industry executives we spoke to are sceptical whether those numbers are correct.

Third, given that cash in outlets are so thinly spread, the question is how many of those user numbers are actually funded or being active. Like Indonesia, e-wallet players also have to figure out a way to wean off their costly discount and cash back programs required to attract and retain users.

Current promos indicate GCash and PayMaya’s concerns in getting people to be active. Case in point, the SM Store and PayMaya Philippines issued a nationwide 10% rebate on all purchases made using PayMaya QR, up to almost $2 (PHP 100) per branch per day from January-April 2018. More recently, one e-wallet offered a promo of cash in of $0.40 (PHP 20) for getting a free burger at local burger joint Jollibee, with the cost between $1-$1.17 (PHP 50-60). For several million customers, that amounts to material capital losses. Both GCash and PayMaya incurred losses in the billions of Philippine Peso each in 2018. PLDT incurred a loss of $58.65 million (PHP 3 billion) in Voyager. PLDT stated that it may have to wait until 2021 to see a turnaround in Voyager Innovations, While e-wallet players are trying to create a habit and achieve critical mass, at some point this strategy has to pay off. 

The tug of war between PayMaya and GCash is an old rivalry – as far back as the early 2000s – between the major telecommunication companies in the Philippines: PLDT/Smart and Globe. Their payment platforms have different customer segments and distribution models, but both ultimately aim to evolve into super wallets. GCash, which is managed by Globe Telecom, the country’s largest telco, leads the race in urban areas.


In pursuing cashless payment services, GCash followed a pure digital distribution model, focusing on the tech-savvy users of the urban areas. GCash currently offers a more comprehensive set of payment and finance features such as scan to pay, where users can pay directly on Lazada, invest in money market funds or transfer funds to partner banks. GCash also launched a blockchain-based cross-border digital wallet remittance service in June 2018, based on Alipay’s blockchain infrastructure to transfer money directly between those who are in Hong Kong and the Philippines.


PayMaya centred its core distribution model around its 27,000 small rural mom and pop stores because of the demand on its Smart Padala, a domestic remittance service from the business process outsourcing (BPO) industry. PayMaya’s platform users may seem large but it’s primarily because it’s joined with Smart Padala customers using remittance service and not its mobile wallet transfers and payments.

Unique to PayMaya is the payout feature that offers disbursement solutions for payroll, allowances and incentives for the use of companies, schools and other organizations; from there users can do a range of transactions online and with its growing partner merchants. 

Some of the recent enhancements made by PayMaya involve faster customer on-boarding and better digital know-your-customer (KYC) flow. Aside from digital goods, PayMaya also introduced the purchase of physical “treats”, such as food items and vouchers for e-commerce, travel and transportation services under the PayMaya Shop, which includes other features such as micro loans.  

“We are expanding our channels even as we already have the widest Add Money Network, with over 40,000 touchpoints all over the Philippines. This number is almost double the number of offices and branches of banks and non-banks supervised by the Bangko Sentral ng Pilipinas. These touch points act as “digital financial services nexus”, serving as exchange points for cash and e-payments, and vice versa,” stated PayMaya management in an e-mail response.

Further initiatives planned for 2019 are better solutions for micro sellers and small businesses, such as e-mail invoicing and disbursements to its PayMaya Checkout.


Grab, on the other hand, is yet to launch the full features of its mobile wallet. GrabPay, which is still in its early phase in the Philippines, may become a more serious threat given Grab’s well-positioned brand in the country, regional presence and the ability to integrate various consumer sectors with its growing financial services arm. According to Grab, one in six Filipinos has already installed the Grab app by June 2019. Its growing online food delivery platform, GrabFood, is allegedly  number one in the Philippines and as of May 2019, has seen a 44-times increase in completed orders since it was first soft-launched in June 2018. 

GrabPay’s user base continues to grow by 30% every quarter. However, as of June 2019, 25% of all Grab transactions in the Philippines are still paid through GrabPay’s cashless services. This level is mirroring Lazada’s e-commerce business transactions with consumers.

Notwithstanding, it is aggressively building its payments ecosystem. It announced a tie up with the largest retailer chain SM in offering the purchase of SM Cinema tickets at the counter and online. Grab also issued their first co-branded cards in partnership with Citibank. In 2019, Grab will be piloting a bus marketplace service wherein the company will partner with bus operators and shipping lines in Metro Manila to provide an on-demand ticket booking system for bus rides and ferry rides. It will also progressively roll out hotel bookings, on-demand video streaming, ticket purchasing and bill payments. 

The route to profitability for e-wallet players

Based on the experience of digital-only players in other countries, the route to profitability has to include lending and to a certain degree, deposit taking. Payments only will remain an arduous road to turn profits. This in turn would require a lending or full banking licence, which e-wallet players in the Philippines do not have. 

GCash and PayMaya were eager to bring in Tencent and Alibaba by selling a portion of their ownership. GCash as an app, which has been available in the market since 2012, has hardly gained any traction until Ant Financial made an undisclosed investment into Globe Fintech Innovations Inc. (Mynt) in 2017 to scale up digital payments and jointly establish a QR code with Alipay. A year later, PayMaya signed an agreement with Tencent and Kohlberg Kravis Roberts & Co. to acquire $175 million worth of shares in Voyager.

Those partnerships are not without returns. Tencent wants PayMaya to penetrate 50% of the Philippines’ adult population, translating to 40 million users, by 2022. At some point those investors may push their vehicles to buy into a smaller rural bank to obtain those powers. Acquiring an electronic money issuer license (EMI) through a rural bank may be just an intermediary step in obtaining far wider range of access to the market. Foreign companies are allowed full ownership of Philippine financial institutions.

Those ambitious numbers put enormous pressure on Mynt and PayMaya to scale. However, as these numbers have yet to be verified, The Asian Banker is cautious to accept such claims. The more important metrics in digital payments are monthly active users and gross transaction volume, metrics both players don’t make public.

Banks increasingly marginalised 

Banks have their own issues and are at risk in becoming increasingly marginalised in the e- wallet space. While they are desperate to monetize their mobile payments infrastructure, but have no functioning ecosystem with proper use cases to fall back on, they resort to charges on infrastructure for lack of imagination. BDO, and since July, the Bank of the Philippine Islands (BPI), are charging for in app single transfers to other banks from $1-$2 (PHP 50-100), while BPI goes beyond this, levying a charge of app transfer (unenrolled accounts) within BPI with $0.20 (PHP 10). In a country where average daily pay outside urban centres ranges between $3 and $7.82 (PHP 150 – 400) a day for 70% of the population without banking account, it runs counter to financial inclusion, and paying $2 for a micropayments transaction does not encourage Filipinos, in general, to adopt the convenience of cashless mobile transfers.

E-wallet players face too many unresolved issues to thrive

Given the unresolved questions on cash in and a lack of savings options, GCash and PayMaya are not targeting the real unbanked market for e-wallets. With those limitations, cash continues to be the more convenient option. There is no clear path to profitability for both telco players whose incentive programmes make them burn through huge amounts of capital in the hope to gain critical mass. E-wallets and banks in the Philippines have to grow through value added and then grow their financial services to sustainability. But a lack of functioning ecosystems and regulatory limitations beyond payments makes turning a profit an arduous road, leaving the door open for others to grab the real potential of e-wallets in the Philippines.

Click here to read "PayMaya serves the unbanked in the Philippine through the mobile app"

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