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Nexus Between Payments Digitalization and Cash Usage in the Philippines

The emergence of innovative contactless payment technology is revolutionizing the retail payment markets, with the expectation that cash usage would be tempered over time. The literature suggests that payments digitalization has had some considerable impact on cash usage in some advanced economies that began their digitalization journey much earlier, but less so in others.

Based on limited payments digitalization data available, preliminary empirical estimates for the Philippines indicate that the pandemic induced some substitution of cash with digital payments, but not yet on a significant scale. While the remarkable inroads in retail payments digitalization and demographics are expected to bring about behavioral shift in cash usage, the pace and extent of substitution would be contingent on policy reforms aimed at widening access to affordable digital payment services, secure digital infrastructure, and privacy protection, among others. Policy mix must also give equal weight to addressing vulnerability to cyberattacks and the risk of exclusion of individuals, who lack the capacity to access and make informed choice about the use of digital payment solutions.

Further research and reliable granular data are needed to deepen understanding of the evolving interplay between payments digitalization and cash usage, and align strategies that ensure fair access to safe and reliable payment options, including cash. After all, financial inclusion is about empowering consumers with safe access to and capacity to choose from wide array of financial services and payment options that suit their lifestyle and preference. Thus, both cash infrastructure and digital payment infrastructure would need to progressively adapt to changing times to ensure that the freedom of choice in payments is safeguarded.


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