1. Demand for Domestic Payments in the Philippines: Know Your Market Research Sponsored by:

3. Latent demand for remote payment services

4. The main drivers causing non-users to become users and users to switch between payment service providers

6. Lenses Personal payment instruments Money transfer (MT) Bills payment (BP) Loan payments (LP) Payment methods PSPs Formal PSP—banks, pawnshops, remittance agents, mobile money Informal PSP—friends, driver, etc Direct pay At biller payment center Population Payers: Made a payment in last 12 months Non-payers: Did not make a payment in this period

8. Main PSPs used are pawnshops (ML, Cebuana L. & other), Western Union, LBC and the bank transfer services

9. Price confusion: generally did not know price structures

10. Respondents vaguely aware of mobile money services

11. Brand confusion over Smart Money/ Smart Money Transfer and GCASH/ GCASH REMIT

13. Findings 3: National payer profile (All adults 95% CI, +/-3%)

15. 76% of the users are classified under Class D (poor), while 19% belong to class E (very poor) and 5% to Class ABC (upper and middle classes)

16. Most households where they live have electricity (96%), cellular phones (71%) and running water (80%)Other information: 32% of users indicated they were willing to pay PhP 50 (median) for remote bill payment services, e.g. via mobile phone or messenger 24% report receiving money from abroad in the last 12 months 7% of total users then on-send money to others (median: PhP 3,000)

17. Findings 4: Awareness and usage n=1000 multiple responses

19. Mostly within the last 2-3 weeks of the survey – implying regular usage

20. GXI and Smart’s products are mainly used for sending money to other people, not paying bills

21. 33% of non-users reported that the ability to make cross-payments (GCASH<->Smart Money) would make them consider using these services

22. More granular results available from the intercept survey in NCR:

23. GCASH and GREMIT users far more likely to be sending money within the NCR (45% of GCASH users)

24. Smart Money users were split roughly 50/50 between sending money to urban and rural areas

26. Median amounts transferred per transaction per PSP n=1000

27. Users’ frequency of usage n=1000

28. Conjoint analysis was used to quantify consumer preferences via ratings of generic payment services Four attributes: speed, price, convenience and security Each with two values, creating 16 possible combinations Consumers were asked to rate a series of payment services 1-100

29. Findings: Price sensitivity analysis Using a series of price-fairness questions, it was possible to calculate a acceptable price range for different sizes of transactions:

30. Finding: Market size Domestic personal payments per month n=1794

31. Conclusions The Filipino domestic payments market is highly competitive and maturing Awareness of PSPs is high but knowledge and usage of mobile banking products and services are low Users of informal service providers are a stable, geographical market The demand for national domestic payments is significant, but little unmet need

32. Full report is available at http://www.bankablefrontier.com/assets/pdfs/ BMGF.PDP-FinalReport-dec2010.pdf

33. Slide Annex

35. Performed in mix of urban, semi-urban and rural locations

36. Primarily open-ended, qualitative questions

37. Approach: group of ‘homogenous strangers’

39. Intent to get reasonable information on less-used providers and test survey methodology

40. In-person interviews with 300 respondents at payment service providers in Metro Manila

41. Interviews conducted at 13 sites including a mixture of pawnshops (e.g. ML, CebuanaLhuillier) along with money transfer services and banks

43. The national population survey segments total respondents n=1,794

44. How things stack up Users Deciding Formal and Informal Q 1000 Users Populationrepresentative Bill Pay, Money Transfer & Loan Payment Payment Type Personal Direct, Informal & Formal Payment Payment Method Personal Direct Payers 228 Non-Deciders 57 Users 1000 Non-Payers 509 All Adults Sampled and Interviewed 1794 HouseholdsInterviewed 4 814 Houses Approached Not to scale

45. Reasons Given by Non Payers Base 28% of population N=1,794 Q5: Why did you NOT send money or pay bills or a loan in the last 12 months (multipleresponses)?

46. Payment Method vs. Payment Type N=1794 Type

47. Payment Method vs. Payment Type n=1794 Type

48. Payment Method vs. Payment Type n=1794 Type

49. Usage and potential usage of PSPs N=1000

51. National Adult Survey of UsersUsers decide which payment method and provider they will use1000 Payment Deciders

52. Users are: Made a remote payment in the last 12 months Used Informal or Formal payments methods Were involved or made the decision of which payments service provider PSP to use Money Transfer and Bill Pay examined

53. Customer attrition n=1000 Highest for Western Union, LBC and the pawnshops– those performing MT

54. Why users stopped using PSPs n=1000 and once used PSP

55. Travel times and costs of recipients n=1000

56. Conjoint analysis quantifies consumer preferences via ratings of generic payment services Consumers asked to rate a series of payment services 1-100 Four attributes: speed, price, convenience and security Each with two values, creating 16 possible combinations (e.g.):

57. Importance of speed and trust, less price, to consumers

59. At what price would it be expensive but still worth it?

60. At what price would it be too expensive?

61. At what price would it be too cheap (raising quality concerns?)Approach pioneered by Dutch economist Peter van Westerndop (1976)

62. Graphing the response curves to the four questions…

63. Yields an acceptable range of prices to consumers Certain providers appear to be over-charging, relative to consumer expectations…

64. Those using informal services only form a distinct sub-group… n=1000

65. Usage of formal service providers by informal users

66. Payment Method vs. Payment Type n=1794 Type

67. Payment Method vs Payment Type N=1794