When a new technology comes to the market, there is always some concerns by both users and regulators. This means that pre-launch and through the operational phases there also needs to be strong educational messages published. The better the educational material available, the more comfortable people feel when using the technology.
The new technologies that have affected the market recently are:
• Open Banking
• Payment gateways
• E-Wallets
The Boom of the E-Wallet
Pre-pandemic cash was king. People would keep cash in their homes, to pay their bills and to keep for shopping. Rent was paid by bank-to-bank transfer or post-dated cheques and people trusted the money that they could see and feel.
To pay for subscriptions people had to pay monthly or go into their branch and set up an Auto-Debit-Arrangement (ADA) on a signed contract with their bank. This physical control gave people confidence in managing their financial situation knowing that they are in control of what goes in, and what comes out and when.
The growth of the cashless society is predicted to keep going, above the 25% of all transactions today. When a society comes from a “Cash is king” perspective to a “Cashless” perspective, the growth metric is steep. Since 2020 eWallets have grown in popularity to the extent that over 25% of all payments are through eWallets. These include salaries being paid, eCommerce payments made, bills and even shopping and eating out. Restaurants and bars accept eWallet payments from their customers for easy payment options.
During the pandemic people were forced to pay through Apps for Taxis, food delivery, and as shops and offices closed, to pay for rent, bills and all their eCommerce shopping through growing marketplaces like Lazada.
Trust of the apps was supported by the necessity of the situation and so many businesses using the payment process. There were a few bad people taking advantage of the situation and of the new users for the tech, but these were few and far between and quickly managed by the payment companies.
Trust in online payments grows.
Companies offering payment gateways like Xendit increase the availability of products and services for consumers in the growth market. Now customers can make card payments online, use eWallets to pay for more products and are connected to their bank for larger payments or sending money to friends and family.
Payment gateways take a small percentage of the transactional costs to fund their operations. These fees change depending on the speed of the transaction and of the type of transfer. Moving money to an eWallet is cheaper than moving to a different bank. Moving small amounts of money is cheaper than moving larger amounts. Moving money slowly is cheaper than moving money quickly, but in today’s fast paced, buy now, want now society people often opt for the faster transfers.
Faster transfers mean that bills can be paid quickly, upgrades to services are almost instant and money is available when you need it.
Next level financial processing.
With Open Banking coming to the Philippines transfers and online transactions can be processed even faster. Open banking verifies the transaction, the person making the transaction and the end point destination.
Open banking reads the transactional data to verify affordability quickly and safely ensuring that people only borrow money that they can afford. It means that people have repayment terms that match the time of the month for their incoming money.
It is a safe process; the software does its job and is rarely touched by human hand. Passwords are protected, data sensitivity is respected, and banking information is tightly controlled.
With Open banking, information like name, address, employer, geolocation, salary frequency, bank balances and affordability are all calculated in split seconds giving the receiver confidence that you are who you say you are and can afford the financial product offered.
The technology supports government initiatives of responsible lending and removes predatory lenders from a market. If a lender offers money to a customer that they can not afford, more of their customers will go into debt and will struggle to repay their loans. Sensible lending institutions offering loans that customers can afford support their customers with funds available when they are needed and on repayment terms that they can afford.
Affordability is key to financial awareness and inclusion. The more people are aware of what they can afford, more people have the ability to repay their debt and to put some money into savings each month.