Growth in Phillipino card and payments market continues

The Philippines growth in the cards and payments channel continues as the number of cards increases by 7%. EPI looks at the current state of the Filipino market and what can be expected from it over the next few years

The Philippines growth in the cards and payments channel continues as the number of cards increases by 7%. EPI looks at the current state of the Filipino market and what can be expected from it over the next few years

Steady growth was recorded in the Filipino card payments channel during the review period (2008-2012), as the number of cards in circulation increased at a CAGR of 7.65%, rising from 40.8m in 2008 to 54.8m in 2012. This growth was primarily driven by the prepaid cards category which registered the highest growth rate at a CAGR of 17.26%.

International banks dominate the credit card category while domestic banks lead the debit card category

The card payments channel is dominated by four large domestic banking groups – Metrobank, Banco de Oro, Bank of the Philippine Islands (BPI), and Land Bank of the Philippines. In the debit card category, domestic banks held a collective market share of 57% in 2011. Foreign banks such as Citibank and HSBC dominate the credit card business. In terms of number of credit cards in circulation in 2011, Citibank held the highest share of 20.6% with 1.4m cards, followed by HSBC with 10.8% and 747,676 cards.

Remittances driving debit and prepaid card categories

The cards and payments industry benefits from international remittances due to the large number of Filipinos migrating to other countries. Remittance money rose by 5.6% to US$10.7bn in the first six months (January-June) of 2013 and it is expected to grow further as more Filipinos seek employment abroad. In response to this, banks are offering a number of remittance debit and prepaid cards, allowing migrant Filipinos to transfer money to beneficiaries in the Philippines. OFW Cash Card and On-time Remittance Card are examples of some of the prevailing remittance cards in the country. In 2011, BPI held 25% of the remittance business market share, followed by Philippine National Bank (PNB), the Metropolitan Bank & Trust Co. (Metrobank) and Rizal Commercial Banking Corp. (RCBC) with respective market shares of 15%, 11% and 6%.

Increased focus on technology to differentiate offering

As competition intensifies, banks are implementing innovative strategies to attract new customers and retain existing ones. Shopping rebates, raffles, installment programs, discounts and freebies at partner retail merchants on credit card purchases are common tactical promotions. To differentiate their offerings, banks are adopting new technology and redefining customer segmentation. Analytics-based platforms are used to improve customer segmentation and develop targeted offering. There is also an increased focus on rewards to retain customers and drive revenue growth. BPI Bank provides BPI Express credit cardholders with instant rewards at merchants while tracking each purchase made through a smart chip embedded in the card.

Interconnectivity is driving transaction volumes

The number of card transactions was positively impacted by the interconnectivity of domestic ATM and POS terminal network operators such as MagaLink, BancNet and Expressnet. In 2010, these three domestic operators connected their POS terminals across the country. Interconnectivity drove card transaction growth at a review-period CAGR of 10.74%, rising from 153.2m transactions in 2008 to 230.4m in 2012. Transaction volume at ATM terminals grew at a slower pace compared to transactions at POS terminals, at a review-period CAGR of 6.79%, representing the shift from cash to cashless payments.