State of E-Finance and E-Payment in the PhilippinesJanette Toral
There are so many ways on how entrepreneurs can accept payments online. The mechanics are becoming much friendly and there’s certainly one that can suit the needs of the Filipino today.
1. Cash – payment is given in person, either before or upon delivery of product or service.
2. Bank deposit – payment is deposited to a bank account. Afterwards, the product or service gets delivered.
3. Remittance service – for overseas buyers who don’t have a credit card or sufficient credit limit, another option is to allow them to pay through a remittance service. Examples are:
4. Credit card – using traditional credit card to pay for products and services online.
a. YesPayments.com (http://www.yespayments.com)
b. YOSSN.com (http://www.yossn.com)
c. UnionBank The Port (http://www.unionbankph.com)
d. 1 Time Payment (http://www.my1time.com)
e. Equitable Card Network (http://www.equitablecard.com)
5. Mobile phone payment – if the product is available in small amount denomination, funds can be transferred through this medium.
I believe that e-commerce in the Philippines is underrated. The International Data Corporation had reported that e-commerce in the country is pegged at US$3.5 billion in 2005. But this is only a result of less than 5,000 companies that are actively using e-commerce in conducting their business.
However, when you look at the magnitude of e-commerce today, the said amount is only less than 10% of what is really happening. The Bureau of Internal Revenue alone was able to collect 50% of its revenues through its electronic filing and payment system. This already amounts to 234 billion pesos in 2004 and nearly 275 billion pesos in 2005. Nearly 15,000 companies transact with the BIR for this purpose.
This is not to mention trading networks like BayanTrade, E-Com Philippines, and private exchanges the grocery, retail and distribution, manufacturing, logistics, telecommunication, and banking sectors.
ICT adoption and E-Financing
Today, small enterprises have yet to fully adopt e-commerce. What deters businesses to use it is the lack of adoption of computers in business. To date, the country only has two million computers with half of it in business establishments. Less than half a million are found in households.
The Philippines personal computer import, according to Gartner, is nearly 1.5 million units in 2004 while we only have less than 400,000. We have 11.8 million Internet users but our broadband Internet connection subscribers are pegged at 125,000.
Furthermore, getting into e-commerce, either putting up one or joining a trading network, requires a significant amount of investment. A fully blown e-commerce website with a full blown e-payment, staffing, marketing tools, logistics program, and risk management in place can easily cost US$20,000 as first year investment.
This does not include improving the back-end software applications. Most SMEs are using spreadsheet programs to do most of their accounting, sales, and resource planning needs. Competing with SMEs in other countries who uses more sophisticated tools puts Filipino SMEs at a great disadvantage.
Financing companies are now being encouraged to develop e-financing programs to help SMEs to participate in e-commerce. Rather than just being limited to hardware investments, programs must be made available to cover cost of joining trading networks and customized application development. The Department of Trade and Industry’s SB Corporation just launched its SME-FIT program where IT companies can be accredited by DTI. As soon as they are approved, they are given a credit line that they can use to finance hardware, software, website, and customized application development and be able to offer it in easy payment terms to SMEs, rather than the usual high investment upfront.
E-Banking and Inter-bank fund transfer
At present 44 banks have been offering e-banking services using the Internet, mobile phone, and telephone. What is stopping full-blown e-commerce to take place is the lack of availability of seamless inter-bank fund transfer (IBFT). Only around 42 banks today, members of BancNet and Megalink, are capable of offering this service. Majority of banks, especially the big players such as ExpressNet, are reluctant in offering this. This slowness to adapt has also harmed the rural banks from joining the bandwagon.
As a result, suppliers of big companies have to open accounts in several banks just to be able to accept and send payment. This does not provide enough motivation for small and medium enterprises (SMEs) to see the real value of e-commerce and computers in their business. What is the use of making the paper submission faster if it’s not supported by an efficient payment settlement system.
Services like Smart Money, Globe’s G-Cash and payment gateway initiatives to be offered by the government through Development Bank of the Philippines and Landbank are being developed today as a stop-gap solution to make IBFT a reality.
IBFT is the biggest barrier in the development of e-commerce in business and government in the country.
There’s much to be done
In addition to what I already stated above, I believe that there’s much to be done in order to make e-commerce accessible to SMEs. This includes:
1. Have an efficient cybercrime program. Our law enforcement needs annual funding to ensure that they are capable to assist citizens and merchants in combating fraud and cybercrime. To date, the Philippine National Police and National Bureau of Investigation are working on a framework with the intent of minimizing overlap and identify budget requirements. Note that our law enforcement entities have not received a single centavo of funding for cybercrime. The equipments they have to date were the ones donated by the U.S.A. government.
2. E-Government Prioritization. E-government programs in the country must be prioritized to ensure that government must be able to offer e-commerce services to its constituency, in compliance to RA8792. The current lack of an E-Government Plan makes all initiatives scattered, overlapping or redundant, sometimes even competing with the private sector, and have no big picture vision as to how will we get there. If citizens and enterprises will have the capability to transact electronically and efficiently with the government, perhaps the acceptance of e-commerce, the incentive do it, shall be justified.
3. Resolve leadership crisis. There’s confusion today as to who is the one in charge of e-commerce in the Philippines. Although Republic Act 8792 states that it is the Department of Trade and Industry, the executive order creating the Commission on Information and Communications Technology overlaps with the DTI in coordinating and monitoring e-government adoption efforts. This is the same case as to who has the ultimate decision authority on the yearly allotted, 1-billion pesos E-Government Fund, created in pursuant with RA8792, and managed by the CICT. Who is accountable to it and can be made responsible in case of mismanagement?
4. Consumer protection and data privacy. There’s a need for guidelines as to how can consumers be protected in electronic banking (including ATM and mobile), online e-commerce, other value added services (Internet access and text messaging promos). The lack of clear procedures as how complaints shall be filed and resolved is also hindering confidence on e-commerce in the country. With this in place, our country being put in blacklist by some international websites and payment sites shall be remove and resolved.
5. Vigilant private sector. The private sector should get organized and identify its goals for e-commerce in the Philippines from an end-to-end perspective. Sometimes, the issues that we avoid to tackle, is the one that is causing the bottleneck, for e-commerce to flourish in the country.