Real-Time Payments Provide Huge Opportunity for Economic Growth
The Philippines introduced its real-time payments scheme, InstaPay (an interbank funds transfer service launched by Bangko Sentral ng Pilipinas), in 2018.
The country recorded 480 million real-time transactions in 2021, which resulted in an estimated cost savings of $17 million for businesses and consumers. This in turn helped to unlock $60 million of additional economic output, representing 0.02% of the country’s GDP.
With real-time transactions forecast to rise to 1.9 billion in 2026, the Philippines’ real-time payments system will begin to enjoy significant economies of scale that were out of reach in 2021. As a result, net savings for consumers and businesses are forecasted to climb substantially to $2.2 billion in 2026, helping to generate an additional $322 million of economic output, equivalent to 0.06% of the country’s GDP.
However, the untapped economic potential of real-time payments in the Philippines still remains large. According to the Cebr, the theoretical impact of all payments being real-time could add 6.5% to formal GDP by 2026. However, these are theoretically modeled benefits; they do not suggest that there is no place for non-instant electronic payments or paper-based payments in the future.
The Philippines’ economy is still heavily connected to, and reliant on, paper-based transactions. In 2021, paper-based transactions represented a 98.7% share of payments volume, while for the same period real-time payments only represented 0.5% of payments volume. Real-time payments are expected to reach 2% by 2026. With the Philippines’ geography separating the population within its archipelago, the availability of a real-time transfer system will likely have a significant impact on the economy, facilitating P2P and especially B2B transactions as they move away from paper-based payments, which are much less well-suited to facilitate commerce between islands. Currently InstaPay only works within the Philippines, but it is looking to collaborate with the Monetary Authority of Singapore to link InstaPay with Singapore’s PayNow. This collaboration should facilitate real-time, cross-border payments between both countries at a cheaper rate than established remittance providers.
Real-Time Payment Types
Year of Real-Time
We have noted in previous reports that a degree of self-sufficiency characterizes the real-time payments scene in the Philippines. Transactions grew strongly after the launch in 2018 of the InstaPay electronic funds transfer system, and the conditions for growth exist — a population of 110 million, a high share of paper-based payments and accelerating adoption of digital wallets. However, the country’s position at the lower end of ASEAN GDP has not attracted investment from international players. As a result, domestic players dominate the payments ecosystem.
The volume of low-value payments is continuing to grow, boosted by the COVID-19 pandemic, with banks encouraging expanded domestic use cases and a growing number of domestic fintechs. But the innovations that will fuel further rapid growth are hindered by the toolkit approach taken by the banks, almost all of whom have built their own real-time infrastructure. This has resulted in inconsistencies in how some banks connect to the real-time rails, a situation not helped by the inharmonious way mandates are often rolled out. Overall, this tends to deter new entrants and make it harder to integrate the country’s payments system with others in the region.
On the positive side, the progress made by neighboring countries clearly shows the way beyond low-value, through Request to Pay, to high-value transactions and cross-border harmonization. In due course, we expect the Philippines to become more active in regional payments modernizations, but in the short to medium term, there is a need for national mandates on standardizing connectivity and unifying payments messaging. These would enable domestic players to leverage the scale to increase efficiency and lower cost.
Mobile Wallet Trends
% of adults who have a mobile wallet and have
used it in the past year (2021)
Real-Time Total Participants
Population Banking Level
Number of debit, credit and
charge cards per adult
Index to global average
F5 Yr CAGR
Payments Fraud Rate
Population who reported being a
victim of fraud in the last 4 years
Top 3 Payment Fraud Types
|% of fraud victims||Trend|
Share of Volumes by Payments Instrument
- Paper-based payments
- Electronic payments
- Real-time payments
Real-Time Payments Volume and Its Share in Overall Non-Paper-Based Transactions, 2015-26f
As of 2021, the Philippines is classified as a lower-middle-income country and the 37th largest global economy (Cebr World Economic League Table, 2022).
The 2021 payments mix of the Philippines was heavily dominated by cash, with 98.7% of all transactions made via paper-based payment methods. Despite its current low share of transaction volumes (0.5%), real-time payments are expected to grow to 2.0% in 2026.
As a result, the realized impacts are relatively low in comparison to other countries, although the unrealized potential benefits are significant. 2021 consumer- and business-level benefits reached $17 million, with economy-wide efficiency gains estimated to facilitate $60 million of economic output (0.02% of formal GDP).
Within this, however, there was a small negative net cost of $3.2 million as a result of higher real-time transaction costs due to indications that real-time payments are less efficient than paper-based payment methods. The high initial costs and low take up means that costs per transaction have yet to drop below paper-based transactions.
As real-time payments grow, the country will begin to enjoy economies of scale and see a sizeable reduction in net payment system costs. By 2026, we estimate that realized benefits for consumers and businesses will total $2.2 billion, almost exclusively driven by net payment system cost savings. On a per transaction basis, Philippine real-time payments will have a 51.9% lower average payments cost, compared with non-real-time payments.
By 2026, the forecasted economy-wide impact of real-time payments is estimated to reach $322 million of economic output, equivalent to the output of 28,838 workers. Therefore, if the Philippines can successfully integrate real-time transactions into its payments mix, it will be able to enjoy significant future economic benefits.
For Businesses and Consumers
Net savings for consumers and businesses stimulated by real-time payments
Projected net savings for consumers and businesses stimulated by real-time payments
of economic output
of GDP facilitated by real-time payments
Projected of economic output
of GDP facilitated by real-time payments
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