With their unique remittance situation, high smartphone usage and weak banking infrastructure, it's no wonder that the Philippines is a hotbed of Bitcoin activity.
The Philippines is uniquely suited to adopt bitcoin, possibly more so than any other country. Recently we covered a Philippine bitcoin traffic spike on Localbitcoins, local exchanges, and Google too. The archipelago country has the world’s 12th largest population and is in a very unique situation for bitcoin adoption.
The country has a rich history, resulting in two official languages and 19 officially auxiliary languages. The country is also technologically savvy, few countries consume online content like the Philippines. By some estimates Filipinos spend an average of 6 hours per day online, which is more hours than any other country in the world.
In a recent interview, with the Huffington Post, the former Google Managing Director in Southeast Asia, Julian Persaud, stated “the Philippines has over 44.2 million internet users, the second highest ranking in Southeast Asia and the sixth in the whole of Asia. This number is forecasted to double by 2016.”
Filipinos also love their smartphones, having recently been named “the Selfie Capital of the World” by Time magazine. Social Media use is more popular with Filipinos than any other country save Argentina.
Yet their banking infrastructure is lagging behind. 69 percent of the 101.6 Million Filipinos have no access to the banking system or credit cards, according to the World Bank. E-commerce is also well below average, only 31% of the country even has a bank account, due to the poor banking infrastructure.
A major component of the Philippine economy is Business Process Outsourcing (BPO), which entails mostly call center work for multinational corporations. The BPO industry in the Philippines is one of the world’s largest, due to the country’s excellent multi-lingual, and relatively low-income, workforce. Their government takes this segment very seriously and makes sure it’s steadily growing.
According to the IT and Business Process Association of the Philippines (IBPAP) the growth in this sector has been unprecedented in recent years. “Last year, the Philippines BPO sector posted growth of 26% and generated export earnings of about $9bn.” This revenue accounts for 5 percent of the national GDP.
“Estimates by the World Bank suggest that the BPO and associated IT sector have the potential to generate export earnings of up to $55bn by 2020, representing some 11% of GDP and directly providing employment for more than 1.8m Filipinos.”
— – IT and Business Process Association of the Philippines
Recently the Philippines has been challenging India’s BPO industry, which has historically been the world’s largest. Manila has been nipping at the heels of Bangalor, for the honor of being the world’s most prominent BPO destination. Bangalor is the hub of India’s BPO industry. Cebu city, in the southern Philippines, is also on the top 10 list, although much of the rest of the list is still dominated by Indian cities.
None of these figures include the many thousands of Filipino freelance workers that post their availability on jobs boards, including Onlinejobs.ph, eLance and Upwork. The figures also exclude classified ad websites like Manila’s Craigslist jobs board. With all of these cross-border salaries being paid, Bitcoin could be a natural fit.
The Philippine remittance market is ranked number three globally. In 2014, the World Bank estimated it to be worth a total of $28 Billion US, only bested by the $70 Billion in India and $64 Billion in China. Filipinos who rely on this income are more than likely to live in a cash-only economy, with little access to banking services.
“Remittances are a big contributor to domestic consumption, the main driver of the Philippine economy. Last year, cash remittances reached a fresh annual peak of $24.348 billion, equivalent to 8.5 percent of the country’s gross domestic product.”
— –Philstar Business section
Non-mainstream, including illegal, remittances also add a large chunk on top of the reported numbers. As reported by the Inquirer.net, the Asian Bankers Association (ABA) said remittances passing through informal channels were 30 to 40 percent more than those facilitated by banks and other legitimate remittance centers. In 2011, remittances were US$20.117 billion.
“At the moment, the illegal channels are much bigger than the legal channels for money transmission. Regulators are called to strengthen mechanisms [against informal channels] and make it difficult for illegal money transfers to take place.”
— – Dilshan Rodrigo, chair of the advocacy committee of ABA
The market is also reportedly growing at a substantial rate. Statistics from the Bangko Sentral ng Pilipinas (BSP) revealed that such funds from overseas Filipino workers reached $2.2 billion in April, a 4.9% year-on-year growth from April 2014.
The numbers of Filipinos relocating overseas, and then sending money back home, is steadily rising too. Data from the Philippine Overseas Employment Association (POEA) shows that there were 310,727 approved job orders in the first four months of 2015. Approximately 33.8% of that figure, the largest single group, were job orders from the middle east.
“Remittances earned by overseas Filipinos are indisputably positive for individual families and the governments balance of payments as well as the GDP. However it has been found that remittances are primarily used for costs of living such us food and education. Remittances fill the function of covering short term costs but wages are not sufficient to enable savings and investments.”
— -The World Bank
Fees at traditional remittance providers in the Philippines, such as Lhuillier and Palawan Pawnshop, are close to 10 percent for small transactions of up to $300 US. The average cost of sending a $200 US transfer stood at eight percent in 2014. For the second quarter of 2015, sending money from the US to the Philippines, the fee for sending $200 USD by bank transfer is on average 5.05%.
While the fees for remittances appear to be steadily declining, international transfers to the Philippines can still take a 20th century amount of time to complete. “The majority of Filipino overseas foreign workers opt to use [faster] services as a result of delays in the traditional banking system, with wire transfers taking up to five business days to process, as well as high minimum deposit requirements. Traditional remittance services can take 3-5 days, faster services (within 1 hour) cost more,” states the World Bank.
Faster remittance providers charge up to 12%, for lower value transfers. Western Union charges up to 8.16%, and Moneygram up to 7.21%, according to the World Bank. This clearly compares poorly to the three cents (US), or less, it costs to send a bitcoin payment of any size.
Bitcoin would certainly ease the problems of speed and cost. With such a large, internationally connected audience, there may be no better time or place for Bitcoin services and new bitcoin-accepting merchants to target their efforts towards the Philippines.