Demand for Domestic Payments in the Philippines: Know Your Market

Research Sponsored by:

Study objectives

The domestic payments research in 2010 was intended to provide a clearer understanding of the following:• Composition of the current market for domestic payments

using demand side data• Latent demand for remote payment services • The main drivers causing non-users to become users and

users to switch between payment service providers• The ‘pain points’ of payers and their recipients with respect to

price sensitivity, accessibility, speed of delivery and trust for payment service providers.

MethodologyPrio

r research

• Reviewing earlier research on domestic payments

Focus groups

• 22 focus group discussions (FGDs) conducted by SEDPI

Intercept survey

• Interviews with 300 users on-site at their payment service providers

Pop survey

• Nationally representative data on all 1,794 adults interviewed

User

survey

• Nationally-representative survey of 1,000 active users of payment services

Lenses

• Personal payment instruments– Money transfer (MT)– Bills payment (BP)– Loan payments (LP)

• Payment methods– PSPs

• Formal PSP—banks, pawnshops, remittance agents, mobile money

• Informal PSP—friends, driver, etc– Direct pay

• At biller payment center

• Population– Payers: Made a payment in last 12 months– Non-payers: Did not make a payment in this period

Findings: 1. Focus Groups

• Primary purpose of MT is for emergencies or else household expenses, followed by education

• Main PSPs used are pawnshops (ML, Cebuana L. & other), Western Union, LBC and the bank transfer services

• Price confusion: generally did not know price structures• Respondents vaguely aware of mobile money services• Brand confusion over Smart Money/ Smart Money Transfer

and GCASH/ GCASH REMIT• Both rural and urban residents make use of informal services

Findings:2: Intercept survey

• Suggests that women are more likely to be payers• High awareness of five payment service providers: LBC, M.

Lhuillier, Western Union, Cebuana Lhuillier & payment centers• GCASH used within the NCR and in urban areas• Smart Money users send money to a mix of urban and rural

areas outside the Metro• Convenience and speed appear to be the major reasons for

choosing service providers for select users• Price sensitivity suggests that LBC, Cebuana and Western

Union are over-charging

None 28%

Transfer only 13%

Loan Only 2%

Bill only 30%

Transfer & Loan 2%

Bill & Loan 7%

Transfer & Bill 13%

Transfer & Bill & Loan 5%

National Payer Profile by Payment Type (n=1794)

Findings 3: National payer profile (All adults 95% CI, +/-3%)

Payment types of all adults

Bill payment 55%

Money transfer 33%

Loan payment 16%

Non Payers 28%

National adult survey: Who are the users of remote payment services?

• More female than male are users (68% vs 32%)• 76% of the users are classified under Class D (poor), while 19% belong to

class E (very poor) and 5% to Class ABC (upper and middle classes)• Most households where they live have electricity (96%), cellular phones

(71%) and running water (80%)

Other information:• 32% of users indicated they were willing to pay PhP 50 (median) for

remote bill payment services, e.g. via mobile phone or messenger• 24% report receiving money from abroad in the last 12 months• 7% of total users then on-send money to others (median: PhP 3,000)

Findings 4: Awareness and usage

LBC M

L

Wes

tern U

nion

Cebuan

a Lh.

Bank t

ransfe

r

Relative

s, driv

ers, e

tc.

Smart

Padala

Paymen

t cen

ter

Smart

Money

Other

pawnsh

ops

GCASH

Money

Gram

CGCASH REM

IT

Other

business

es0%

10%

20%

30%

40%

50%

60%

70%

80%

90%83%

78% 75%69% 68%

47% 46%39%

35%30% 30% 28% 28%

17%21% 23%

10% 7%

21%25%

4%

25%

1% 4%0% 0% 0%

5%

Awareness Usage

Shar

e of

use

rs (n

=1,0

00)

n=1000multiple responses

Findings on users of GXI and Smart PSPs

• Less than 4% of respondents have used either GXI or Smart products in the last 12 months (Smart Money, GCASH, Smart Padala or GREMIT)

• Mostly within the last 2-3 weeks of the survey – implying regular usage• GXI and Smart’s products are mainly used for sending money to other

people, not paying bills• 33% of non-users reported that the ability to make cross-payments

(GCASH<->Smart Money) would make them consider using these services• More granular results available from the intercept survey in NCR:

• GCASH and GREMIT users far more likely to be sending money within the NCR (45% of GCASH users)

• Smart Money users were split roughly 50/50 between sending money to urban and rural areas

• Confusion on price schedule for GCASH and Smart Money is apparent, but do not like “double charging”

Instrument usage per providern=1000

Paymen

t cen

ter

Other

busines

ses

Inform

al

Bank t

ransfe

r

Wes

tern U

nionLB

C

Other

pawn sh

ops

Cebuan

a ML

Smart

Padala

Smart

Money

0%

20%

40%

60%

80%

100%

120%

13%

33% 36%

44%

79%84%

95% 97% 96%100% 100%

86%

67%

57%51%

17%11%

4% 2% 1% 0% 0%

Sending money Paying bills/ loan

Median amounts transferred per transaction per PSP

n=1000

Bank transfer

Western Union

Payment center

ML LBC Cebuana Other pawn shops

Informal Other businesses

-

200

400

600

800

1,000

1,200

1,400

1,600

Chart Title

PhP

Users’ frequency of usage n=1000

Paymen

t cen

ter

Other

business

es

Bank t

ransfe

r

Informal

Smart

Padala

Wes

tern U

nion ML

LBC

Other

pawn sh

ops

Cebuan

a

Smart

Money

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

88%

72% 70%

62% 61%

46%43% 41% 41% 39% 40%

13%

27%30%

37% 38%

53%56%

60% 58%62%

70%

Once a month or more Several times a year at most

Conjoint analysis was used to quantify consumer preferences via ratings of generic payment services

Four attributes: speed, price, convenience and securityEach with two values, creating 16 possible combinationsConsumers were asked to rate a series of payment services 1-100

Ranking

1 Speed—immediate

2 Security--secure and reliable

3 Price—”reasonable fee”

4 Convenience

Findings: Price sensitivity analysis

Size of money transfer (PhP/US$)

1000$25

1001-3000$25-$75

3001-9000$75-$225

9,000+>$225

Acceptable price range (PhP) 38-62 80-155 150-280 230-410As a % 4-6% 5-8% 3-5% 3-5%

Using a series of price-fairness questions, it was possible to calculate a acceptable price range for different sizes of transactions:

Calculation from National Adult SurveyMoney Transfer

MT

Loan Payment

LP

Bill Payment

BP

A. National weighted median per transaction (PhP) 1,786 1,609 744

B. % performing payment type(population-weighted)

32.8% 15.9% 55.2%

C. No. adults in Philippines 57.2 m 57.2 m 57.2 m

Total amount sent(A*B*C)

PhP 33 billion

PhP 15 billion

PhP 23 billion

Total Monthly PhP 71 billion/ US$1.7bn

Finding: Market size Domestic personal payments per month

n=1794

Conclusions

• The Filipino domestic payments market is highly competitive and maturing

• Awareness of PSPs is high but knowledge and usage of mobile banking products and services are low

• Users of informal service providers are a stable, geographical market

• The demand for national domestic payments is significant, but little unmet need

Full report is available athttp://www.bankablefrontier.com/assets/pdfs/

BMGF.PDP-FinalReport-dec2010.pdf

Slide Annex

Graphing the response curves to the four questions…

Size of money transfer (PhP) 1000 1001-3000 3001-9,000 9,000+Acceptable price range (PhP) 38-62 80-155 150-280 230-410