Filipinos spend more time online and on social media than any other country in the world but they also spend less money online than anywhere else: here’s why.
Mark Joseph Panganiban, Fintech Philippines Association’s committee chairman of e-commerce and GM of online payment provider Dragonpay, highlighted payments and logistics issues at the recent E-commerce Expo Asia conference in Singapore.
The payments problem
With very few people owning credit cards and two thirds of the population without a bank account, cash-on-delivery (COD) is the nation’s preferred payment method. (For more details, read WARC’s report: Why digital-addicted Philippines spends the least online.)
Digital payments show potential and adoption of this payment method, at 21%, is significantly higher than credit cards, at 5%.
There’s lots of room for growth here, according to Panganiban. Convenience has been a driver so far, but “most Filipinos don’t really trust it”.
For instance, when it comes to topping up-e-wallets, consumers “do not feel in control of their money” as transactions do not take place instantaneously.
“Imagine you have your tangible cash and you go to a channel to top up but topping up your e-wallet from your bank account to your e-wallet takes four hours,” he said. “That’s one of the biggest pain points.”
The logistics problem
Get past the payments issue and you run into the logistics problem. As internet connectivity has spread, transactions are no longer limited to Metro Manila, which now accounts for around 40% of the total.
“The majority of the 60% is everywhere else, like Luzon, Visayas and Mindanao,” said Panganiban. “It’s distributed, which makes it now more difficult for delivering last-mile.”
Delivery across 7,600 islands is expensive. At 27.16%, the Philippines’ total logistics cost counts among the highest in the region for transport, warehousing, inventory carrying and logistics administration. Compare that with the figures for neighbouring Vietnam (16.3%), Indonesia (21.4%) and Thailand (11.11%).
The country also has high return rates – Panganiban put them at 30-40% – partly a result of the COD payments system which makes it easier for buyers to refuse deliveries.
The perception problem
A recent survey revealed how many Filipino households “don’t know the difference between going online and being on social media”, which makes it difficult to explain the idea of e-commerce.
But amid the various obstacles to e-commerce, Panganiban was clear on the way forward. “Filipinos are very visual,” he said. “Video marketing is one of the major components to penetrate the market.”
Sourced from WARC