Going cashless has been a debate for Small and Medium Enterprises (SMEs) in the past few years. The Philippines is still generally a cash-based economy, but cashless payment options are now on the rise. You can enter a 7Eleven store for emergency items or spur of the moment impulse purchases without any money on you and be able to “e-pay” through online financing services like PayMaya and GCash.
Who would have thought that a cash-intensive quick serve restaurant (QSR) like McDonalds would begin accepting credit card transactions through their self-serve kiosks available in selected outlets? This kind of model cannot be adopted by all QSRs, of course, as they need to be liquid in terms of their cash flows. Having perishable inventory that needs to be replenished daily with raw materials and contractual employees who need to be paid on shorter terms gives SMEs barely any flexibility to extend their payment options and cater to cashless transactions.
For QSRs who have seen the benefits of including cashless transactions as an alternative though, it was more or less a move not just triggered by the fear or getting left behind, but as an opportunity to capture the growing market of digital wallet users. Additionally, going cashless also provides quicker and safer transactions (safer on the side of business owners who don’t have to worry about losing money through theft or inaccuracies that may occur at the register). It’s also said to be more operationally efficient as the time spent by employees counting money daily is an opportunity cost to do other productive things for the business.
Are Cashless Transactions Relevant to Your Business?
Before making the move to offer the cashless alternative for your business, it’s best to evaluate if it does present valuable opportunities. Usually, if your company is business-to-business (B2B), enabling cashless payments would not move the needle for your business at all.
Always base it on your target customers. Are they part of the middle-class segment that is increasingly shifting towards using digital payments more than cash? Would offering a new means to pay also increase their spending at your establishment or their loyalty to your brand? The key word that has gotten most Filipinos hooked on this is really “convenience.” Instead of carrying a bulk of cash, transacting is done by tapping, swiping of scanning a QR code.
Another consumer insight that pushed businesses to get on the cashless bandwagon was the growing consumer habit of purchasing more than their regular order through the convenience of online payments. A woman intending on buying just one item at a store may remember an upcoming birthday or event that would call for an additional purchase, but the cash she has in her wallet may not be enough. SME owners might argue, however, that only the more affluent consumer would automatically have their credit card swiped for such purchases as the normal consumer would probably be wise enough to limit spending on credit card charges. Then again, this brings us to the discussion on the current state of the Philippine economy.
Filipinos going cashless
It’s unfortunate that there are still groups of people who believe the myth that the Philippines is a developing country where most citizens don’t even have bank accounts. Therefore, it’s useless to enable businesses to accept online transactions. In fact, it’s precisely because of the big population of unbanked Filipinos that many FinTech solutions started becoming popular options. Cashless transactions aren’t restricted to credit card payments only. Mobile wallets like GCash don’t operate based on a bank account. Cashing in can be done over the counter in partner establishments.
A survey was recently done by Visa for their Consumer Payments Attitude Study in which 500 Filipinos were interviewed. The general findings were that there was an increased usage of credit card transactions in the Philippines from the previous year’s data and that most, two out of three to be exact, preferred to use cashless transactions. One of the findings showed that 78 percent of Filipinos also prefer to shop in places that offer cashless transactions.
With the increasing popularity of online shopping and ridesharing applications, it’s a good indication that the growth of online payment users will not be stunted anytime soon. On that note, Filipinos continue to use Grab and order food through its Grab Food product as well as Food Panda.
As to the number of Filipinos with mobile wallet accounts, 20 million are supposedly enrolled with GCash while 8 million have accounts with PayMaya. Both providers are said to be the top two in the country while a significant number have accounts with BPI, Globe, Coins (Coins Asia) and other online payment providers.
Fintech options for businesses in the Philippines who want to scale
With all roads leading to adopting cashless transaction options, SME owners are left with only one option: decide soon if they should go cashless. The last to decide on is if your working capital will allow you to live on credit for a number of days. When in doubt, it’s best to decide on your financial policy structure.
Usually, businesses who have restrictive policies are those who are consciously slowing down and have no plans on expanding, thereby allowing no credit sales for their products or services. It’s nice to be on the safe side – especially if your business thrives on a small base of customers who have not gone cashless and are unlikely to have a penchant for cashless transactions.
The business models and companies discussed above are those that are continuous in their expansion and are aggressive in nature of maintaining their market share in their respective industries. They most likely have flexible financial policies that allowed them to adopt cashless transactions quicker. If your business’ policy is similar and have goals of scaling, then this might be a good plan to execute soon.
Scaling can be a challenge for your working capital in the interim, but another advantage of FinTech solutions is the convenience it provides SMEs not just in accounts receivables, but in keeping their cash flow healthy. There’s no financial problem too difficult to hurdle these days.
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