The Philippines is on track to achieve its digital payment target by 2028, with banks and electronic wallet providers waiving or cutting transfer fees. The central bank aims for digital payments to account for 60%-70% of the total volume of retail payments by 2028, in line with the country's development plan. To reach this goal, the central bank has been working to increase the adoption of digital payments. The decision to waive transfer fees came after the growth of digital payments had plateaued, and a breakthrough was needed to propel greater usage.
The volume of digital transactions has increased significantly, with banks' digital transaction volume rising by up to 50% as existing customers conduct more online transactions and new users are onboarded. The central bank's latest report shows that digital payments made up 57.4% of the country's total monthly retail transaction volume in 2024, up from 52.8% in 2023. The value of digital payments also increased, accounting for 59% of the combined value in 2024, compared to 55.3% in 2023.
The central bank has introduced a new regulation to encourage the use of formal digital payment channels by reducing transaction costs associated with digital wallets and banks. The regulation directs financial institutions to adopt reasonable and fair pricing for retail digital fund transfers. Fees charged for person-to-person transactions between different institutions should not differ significantly from charges for transfers within the same entity, with the only allowable difference being the switch cost. This change is expected to bring more people into the formal economy and increase the use of digital payments.
The new regulation is also expected to have a positive impact on the country's digital economy, with increased digital payments use among consumers potentially urging more merchants to adopt digital payments. This, in turn, could lead to more people accessing formal financial services and other tools to help them manage their wealth. While the waiver of transfer fees may slightly dampen the profitability of some financial institutions, it is seen as a positive move for financial inclusion and digital adoption.
Experts believe that the waiver of transfer fees will accelerate the use of digital channels, particularly among lower-income consumers and small businesses. However, achieving the higher end of the digital payments target will require further system-wide developments, including improvements to infrastructure reliability, cybersecurity, and internet connectivity. The central bank's efforts to promote digital payments are seen as a step in the right direction, and the country is now likely closer to achieving its digital payments target.
