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Are we heading to a Cashless Society?

Andal, Catherine
Atienza, Erika
Hariramani, Patrick

Objective of the reporters


Define what is a Cashless Society
To evaluate the readiness of the country for a
Cashless Society
Evaluate if there is a demand
To determine the pros and cons

What is Money?
Means of Payment
Store Value
Unit of Account

History of Money

History of Money

History of Money

History of Money

History of Money

Commodity and Fiat Monies


Commodity money
ismoneywhosevaluecomes
from
acommodityout of which it is made. It is
objects that have value in themselves as
wellasforuseasmoney.
Fiat Monies
iscurrencywhich derives its value from
government regulation or law. In addition
theitemshasnointrinsicvalue

Bangko Central

FU
N
CT
IO
N
S

DeterminationofExchangeRatePolicy
LiquidityManagement
CurrencyIssue
LenderofLastResort
FinancialSupervision
ManagementofForeignCurrencyReserves
OtherActivities

Controlling Supply of Money


Interest Rates
Lower Interest More Cash flows in the market
Higher Interest Less Cash flows in the market

Open Market Operations (OMO)


Buying and Selling of Government Securities

Demand of Money
Is the desired holding of financial assets in the
form of money (cash or bank deposits).

Supply of Money
Money Supply in 2013 to 2014-M3

Supply of Money
Money Supply in 1980 to 2014-M3

Inflation Rate in the Philippines


Inflation Rate from 2013 to 2014

Inflation Rate in the Philippines


Inflation Rate from 1980 to 2014

Interest Rate in the Philippines


Inflation Rate from 2013 to 2014

Interest Rate in the Philippines


Inflation Rate from 1980 to 2014

Summary of Money Supply

Yellow Line for Interest Rates


Gray Line for Inflation Rates

Evolution of Money

Cashless Society?
a society in which purchases of goods or services
are made by credit card or electronic funds
transferral rather than with cash or checks.

Examples

America
Today, only 7 percent of all transactions in the
United States are done with cash, and most of
those transactions involve very small amounts of
money

Sweden
Four out of five purchases in Sweden are made
electronically or by debit card.

Somaliland
A survey in 2012 found that the average customer
made 34 transactions per month on their mobile
phones higher than almost anywhere in the world.

Canada
According to a poll by PayPal Canada, 56% of
Canadians already would prefer to use a digital
wallet than cash.

Hongkong
Octopus Card is the worlds most used smart card
system with over 13 million transactions a day. At the
end of 2013 there were over 24 million Octopus Cards or
products with Octopus functions in circulation.

The world's most cashless countries


Country

Noncash payments'
share of total value of
consumer payments:

Percent of population
with a debit card

South Korea

70

58

Germany

76

88

United States

80

72

Netherlands

85

98

Australia

86

79

Sweden

89

96

United Kingdom

89

88

Canada

90

88

France

92

69

Belgium

93

86

Global journey from Cash to Cashless

Facts:
The world is connected and in 2013, $1 Trillion was transacted over
the internet.
30% of PH GDP is transacted and is coming from 10 Million OFWs
2.6 Million Unique Post paid plan users in PH
20 % of the P57.9-billion wireless service revenues in the first six
months of 2014.

Philippines heading Cashless


-

Growth of internet usage


Growth of mobile/network coverage
Growth of smart phone usage
No. of ATMS in the Philippines
No. of credit cards in the Philippines

Infrastructures
With cash, the only infrastructure you need is
for the merchant to have a good you want, you
to have cash, and some extra lying around in
case you need to make change. Thats it. Its
beautifully simple.

Infrastructure for a
cashless society

Number of Global Internet Users


per year since 1993:

Smartphone usage growth

5.754 Million
Smartphones
sold

4
InSEA
th

Mobile Internet growth

23.1% Broadband
Subscription
9.8% of the Population
uses Mobile Internet

Growth of network coverage


The main cellular mobile providers in the country use GSM/GPRS networks. There are also
other technologies now available in the market. These include new 3G /4Gservices that can be
used to access the internet in new cellular phones, the emergence of next generation
networks, and other technologies for linking the last mile (i.e. ADSL, Wi-Fi, VSAT, WiMax,
etc.) (Lallana and Soriano 2007).

Growth in Electronic banking

Automated teller machines (ATMs)


(per 100,000 adults)
The 2014 Consumer Payment Attitudes Study commissioned by Visa revealed
that four out of 10 Filipinos carry more payment cards in their wallets and
that about five in 10 want to do away with cash
Filipinos willingness to transact through automated teller machine (ATM)
cards. Last year, the entire banking industry processed about 217 million
electronic banking transactions valued at P348 billion

Philippines

2000-2004

2005-2009

2010-2014

15.49

17.23

19.31

Estimated Industry Growth Cards Issued


2004: 4.5 Million cards issued
2007: 6.0-6.2 Million cards
(roughly 11% annual growth 2004- 2007)
2008: 6.5 Million cards
2010: 6.7 Million cards
(roughly 3% annual growth 2007-2010)

COA Circular 2004-006- national and local


government agencies can now fully and
confidently collect fees using electronic
payments, including mobile money
Pulilan Bulacan, in particular, launched the very
first mobile money salary disbursement for a
government office in the country last August,
allowing its 300 LGU employees to receive
payroll and transact using their mobile phones.

Generation Y
Generation Y is born between the 1980s to the
early 1990s

Tech/Web Savvy
Ambitious
Multi-tasker
Work-Life Balance & Flexibility

Population Distribution by Age


Group by 2015 in the Philippines

Notes in Circulation

Cost of Production (Cheques)

$.98 cents to issue a paper check


$. 10 cents to distribute those same funds electronically
674 million gallons of fuel each year
3.6 million tons of greenhouse gases annually

Benefits of a Cashless society

Lessens production cost in making money


Secured platform in transactions
Reduce corruption and theft
Minimize use of natural resources
ASEAN Integration
Faster Transactions
Fewer incidences of bounce checks
Better credit management

Benefits of a Cashless society

Government can save for each bill by


Php 20 Php 1,033,340,000
Php 50 Php 403,000,000
Php 100 Php 1,102,160,000
Php 200 Php 889,200,000

Disadvantages
Risk of fraudulent transactionscredit cards and debit cards can
be stolen
Customers privacy since it leaves
behind an electronic trail.
Personal data such as buying
habits can be accessed by
governments, employers and
marketers.
Highly dependent on stable
infrastructure

Challenges
Inadequate education of the benefits of cashless policy
The Philippines recorded 68 index points and ranked 8th among 16
Asia-Pacific countries covered by the latest MasterCard Index of
Financial Literacy (2013). Almost the same in 2011 with an index score
of 68.2
Poverty
Lack of understanding of the policy
Lack of trust. Resistance to change.
Prevailing cash culture in the country
Techno-fobia
Scepticism in the banking/ government system

Infrastructure Issues
Electricity
The Philippines operates three separate
power grids: One for Luzon in the north; a
second for the central Visayas region; and a
third for Mindanao in the south.
The Mindanao grid in particular has reached
the limits of its capacity in recent years, and
the other two grids are close to reaching
theirs. The roughly 22 million residents of
Mindanao, the countrys second largest
island, have been forced to endure regular
rolling blackouts, which the government says
will continue until at least 2015 as it
scrambles to add more capacity.

Internet Speed
According to recent estimates, the Philippines has
the slowest internet speed in the entire ASEAN
region, with a mere 3.6 Mbps. This is far below
the regional average of 12.4 Mbps and the global
average of 17.7 Mbps.
Mobile LTE Connection
According to the February 2014 report State of
the LTE by OpenSignal Inc., the Philippines has
the slowest LTE or Long Term Evolution
connection among the 16 countries surveyed
Among the networks, Globe Telecom and Smart
Communications have one of the poorest coverage
and slowest connection of LTE in the survey with
an average user having LTE access only 38
percent of the time

Technology
Only 3% of the transactions in the country are cashless, compared to
52% in the United States
More credit cards could be distributed in the provinces- entails great
investment from banks
Facilities to swipe
Pay bills
Collect payments

BARTER
CONS
LackofDoubleCoincidence
ofWants
LuckofDivision
LackofaCommonMeasure
ofValue
LackofStoreofValue

PROS
Relatedproductscanbe
tradedsuchasportable
tabletsinexchangefor
laptops.
Homescannowbe
exchangedwhenpeopleare
traveling
Youcanofferaservicein
exchangeforanitem

COMMODITY AND FIAT


COST

BENEFITS

Itdoesnothavebackup
valueandalsosubjectto
inflationanddevaluation
Currencyextremely
vulnerabletohyperinflation

Itiseasytoprint,easyto
transport,divisibilityisalso
easyandhasintrinsicvalue.
Norequiringbackingwith
commoditiescanalsofree
upgovernmentreservesof
goldandsilverbecausethey
nolongerneedtobe
retainedandmaintained.

CASH
COST

BENEFITS

Expensivetoprint
Canbecopiedor
reproducedbysyndicates
Noticeablebypeople
Subjecttowearandtare

Easymanagementbythe
Government
Transparentrepresentation
ofvalue
Acceptedeverywhere
Budgetingiseasy
Minimizesidentitytheft

Recommendations
Enhancement of Infrastructure and Security
Government Support
Adequate Regulatory Framework

Private Investors
Improve education

Enhancement of Infrastructure
Set up systems, card readers and telecommunication networks, which are needed as a
platform for electronic payments. Payment technologies therefore need to become more
efficient and affordable to allow customers to make payments online on a real time basis and,
also at anytime and any place.
Philippine telecom firms continue to build better infrastructure .Globe earmarked P27
billion for capital expenditures this year for the construction of additional cell sites, in
building solutions, data network and others.
The PLDT allocated P32 billion this year, with P260 billion invested from 2004 to 2013 for its
total capital expenditures.
In electricity, the 2012 Power Development Plan (PDP), committed projects from 2013 to
2016 would provide a total of 868 MW, which is more than the estimated additional required
capacity of 500 MW.

Enterprises and consumers adapting to cashless systems


Globe charge (cashless commerce) that transforms
mobile phones into point-of-sale (POS) card
terminals that accept debit and credit card
payments (avail of food delivery services and even
cashless taxi rides)
Citi Philippines and Visa introduced the first
contactless credit card payment technology in the
country with Citibank Visa payWave
Cashless payment service- G-Xchange, Inc. (GXI)
partnered with Standard Chartered Bank (SCB) to
introduce Straight2Bank Wallet in the Philippines
Cashless refuelling by Shell

Government
Sector:

Cashless
Purchase
Card

Launch of a cashless system for government purchases- procurement system which will
allow government staff to make "cashless" purchases through cashless purchase card
The system will enable easier monitoring of government transactions, while facilitating
accurate liquidation and auditing, and ensuring efficient and transparent financial
management in government agencies.

Cost benefit analysis


COST

BENEFITS

Hackers
Doublecoincidenceof
wants.
Canstillbestolen
Canleadtopoorbudget
management

Eliminatesoverproduction
andunderproduction
FasterTransaction
Easymonitoring
Instanttransfersofmoney
Nocashtosteal
Can'tbecounterfeited

Case Study
What is EFTS?

How does it work?

Process of check payments :

Why does it matter?

Benefits

Manageddelayeddisbursements
Collectfasterandeliminateoverdueaccounts
ReduceAdministrativecosts
Reducedtransactionprocessingcost
Improveefficiency
Increasevisibilityandcontrol
Eliminatebaddebts

Risks involved in ETFs

Is there a demand for money?

THANK YOU!!!