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Described as a milestone in the Philippines’ digital transformation journey, the expansion of the country’s QR payment service will enable merchants to accept payments for their goods and services across an interoperable payment network.
Last week, the Philippine central bank, Bangko Sentral ng Pilipinas (BSP), announced the full rollout of the QR Ph Person-to-Merchant (P2M) payment facility.
The move “marked another milestone in the country’s digital transformation journey”, the central bank said in the announcement.
The QR Ph P2M is expected to have a “far-reaching positive impact” on the payments market of the Asian country, as it will bring in small economic actors such as micro, small and medium enterprises (MSMEs) into the digital payments ecosystem. MSMEs represent 98 percent of the registered businesses in the country.
“Because of its low cost and ease of use, QR Ph P2M can enable small unbanked vendors, such as sari-sari store owners and tricycle drivers, to participate in the digital payments ecosystem and allow them to build financial profiles, which may eventually facilitate their access to other financial products and services that can help them grow and enhance the resiliency of their businesses,” said BSP governor Benjamin E. Diokno.
The rollout of QR Ph P2M builds on the successful adoption of QR Ph Person-to-Person (P2P) payments and is planned to be further extended to bill payments in the future.
The use of instant payments combined with a QR code is disrupting traditional retail payments. For small and micro merchants, it provides a lower-cost, non-cash alternative to card payments, both in terms of set-up and the lower merchant fees for day-to-day acceptance. Even for larger retailers, the QR service combined with InstaPay will potentially offer a cheaper solution to traditional card acceptance, meaning that there are various incentives for merchants to support its wide acceptance.
In many Asian countries, evidence shows that instant payments, supported by QR code standardisation, has resulted in instant payments leapfrogging cards as the most popular non-cash payment method. For example, in Thailand and India, the widespread adoption of PromptPay and Unified Payments Interface (UPI) has seen these services overtake card usage in just a few years.
The successful adoption of QR technology in the Philippines has been powered by the improved consumer experience, and was further accelerated by the pandemic, according to Robert Moore, vice president of international managed services, real-time payments, Asia Pacific at Mastercard.
According to a May Mastercard New Payments Index, “75 percent of those polled in Asia Pacific perceive new payment methods like QR codes to be cleaner, and 71 percent see QR codes as more convenient for in-person payments, primarily because consumers are using their own mobile devices”, Moore said, adding that “the rapid adoption of QR code payment has been further accelerated by the pandemic through increased familiarity with the use of QR codes beyond payments and with consumers showing an increased preference for touchless payments.”
The QR Ph P2M brings interoperability in a market that currently operates with many closed-loop and proprietary solutions. With the QR Ph P2M, consumers and merchants no longer need to maintain an account with the same bank or e-money issuer to be able to use the service.
“Whilst InstaPay has seen rapid growth in the past three years, there is still significant headroom for growth of real-time payments in the Philippines,” Moore told VIXIO.
QR Ph’s interoperable payment solution supports InstaPay, the country’s real-time payment system. InstaPay was originally launched in 2018 but was upgraded in 2021 to a new platform operated by Mastercard’s Vocalink. InstaPay uses the ISO 20022 messaging format, and QR Ph is part of the country’s roadmap to develop new instant payment use cases.
One of the key benefits of the QR Ph standard is that it brings the proliferation of many different domestic closed-loop QR standards under one interoperable umbrella, simplifying the experience for consumers, Moore explained.
QR Ph uses the EMV standard that is widely adopted throughout the world. EMVCo is the standards setting body for the major card schemes, including Visa, Mastercard, American Express and UnionPay.
“Essentially QR codes provide a standardised way to ‘read’ the data that is used to create a payments message, which is then passed into the respective payments service,” Moore explained.
The interoperable QR standards, such as the EMV standard, are useful to streamline cross-border payments between domestic real-time payment networks, but there are always some nuances in how they are implemented in each market, he added.
In many other Southeast Asian markets, for example, the national QR standards adopted are not based on EMV QR. However, this should not dramatically impact cross-border interoperability.
“It is probably the global trend towards ISO 20022 messaging standards, which is adopted in InstaPay, that truly enables payments across borders,” Moore argues.
The ISO 20022 messaging standard, which will be mandated in SWIFT transactions from next November, not only improves the user experience in terms of speed and convenience of making international payments but also provides the potential for more consistent management of inquiries and disputes, Moore continued.
Financial institutions, which include banks and electronic money issuers who participate in InstaPay’s service, can meanwhile benefit from improved cross-border payment operational efficiencies and more consistent/collaborative fraud and money laundering prevention across borders, he concluded.
