Filipinos opt to safeguard cash savings at home instead of in financial institutions, according to findings in MasterCard’s “Road to Inclusion” report. The report was released before this year’s World Economic Forum on East Asia, which has “inspiring inclusive transformation” as one of its three pillars. The report examines financial exclusion and underservice across six countries from APMEA (Asia/Pacific, Middle East and Africa): India, Indonesia, Vietnam, Philippines, Egypt, and Nigeria.
Market research company Ipsos conducted the study from the last quarter of 2013 to the first of 2014. Being financially excluded means having no affinity with financial institutions, whereas being underserved means lacking access to electronic payments through debit, credit or prepaid cards. The report’s objective is to provide entry to financial inclusion. Matthew Driver, President of MasterCard Southeast Asia, said, “Understanding the needs and attitudes of these consumers has provided us with important insights. For example, the financially excluded or underserved in urban centres are reasonably well educated and largely employed, so inclusion efforts in cities should be primarily focused on building more relevant, lower cost products and services rather than basic financial literacy. This means that with the right approach there is huge immediate potential in such environments to bring many people into the financial system.”
Financial inclusion benefits not only the target groups, but also the economy, as there can be more progress if there are more people participating in the global economy. Moreover, financial inclusion potentially lessens social dependency. Report findings are based on qualitative and quantitative data — in-depth study of 36 households and 604 interviews. Six households and 100 interviewees were from the Philippines.
Data was collected from either of two target groups, the financially excluded and financially underserved. 31 percent of the Filipinos surveyed pointed to insufficient money as the main reason for not having a full bank account. Six percent said they either don’t want or need an account, while seven percent said they need cash on a daily basis. The report indicates that saving money in coin jars is still prevalent in the Philippines. Target groups refrain from borrowing money, and prefer to spend within their means. Financial management is a prime concern, especially since a reason for being excluded/underserved is for a lack of “disposable income.” These habits could stem from the lack of understanding about bank accounts and credit cards.
Another cause for hesitation is the possibility of forgetting the pin code, which respondents think could prevent them further access to their bank accounts. Only 59 percent of the Philippine target group is aware of prepaid cards, the lowest percentage across countries. Despite the relatively low awareness in the Philippines, 4 percent avail of prepaid cards, the highest percentage of usage along with Vietnam. The Philippines also has the highest usage to awareness ratio out of all the countries. The average excluded/underserved Filipino is 41 years old and has a household income of 350USD, the second highest amount following Vietnam. 42 percent of these Filipinos are employed, whereas 91 percent have attained secondary level education or higher. Having relatively high levels of educational attainment, these financially marginalized Filipinos may be easier to educate about financial inclusion. In terms of earning money, only 15 percent of the Philippine target group receives a salary, with a majority of 51 percent taking payments from friends/family. There is a significant discrepancy between men and women who take their income from a salary — 32 percent men vs seven percent women. High percentages of these Filipinos saw the advantages of having a prepaid card — namely, having control over spending and not having to carry cash.
The fear of losing the card is a perceived disadvantage to 71 percent of these Filipinos, whereas seven percent also thought that losing their card meant others could then have free access to it. Low percentages from the Philippines thought that having a prepaid card involved monetary disadvantages such as having to pay money to own the card, paying regular fees, and needing sufficient money on the card. This may indicate Filipinos’ better familiarity with prepaid cards than others.
The “prepaid card concept” was explained to surveyed individuals from the target groups. 47 percent of Filipinos saw the relevance of prepaid cards, while 38 percent saw it as unique and different. The Philippines was categorized as a moderately receptive market, with 31 percent saying they were likely to apply after being oriented. With technology evidently serving a key role in electronic payments, target groups’ access to it was also factored in the report.
The report hypothesizes that mobile apps that could supervise budget and/or accounts. The Philippines has among the highest percentages that have access to mobile phones, smartphones, laptops, PCs, and tablets. The report said such apps could help excluded/underserved Filipinos to become part of their market’s financial system, as well as expand the economic highways of progress.
“The high use of mobile phones in these emerging markets also creates an opportunity to drive financial inclusion. We believe that a prepaid card linked to the mobile phone account can provide a simple entry point into the financial system and bridge the gap between the formal financial services sector and the millions of underserved or unbanked individuals, especially when combined with services such as bill payment and P2P capabilities. The key is providing relevant services with high convenience and low cost that empower them to change their lives for the better,” Driver said.
