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Shopping and banking go ‘phygital’ in the new normal

Digital redefines consumers’ transactions, but physical channels are expected to blend in

As an avid shopper, Queenie Boado, a third-year law student, used to shop in malls on a weekly basis before the pandemic. For her, shopping helps relieve the stress from both work and school.


Then came the quarantine, and she swiftly turned to online shopping. “Not only it is convenient; it’s much safer than the usual mall shopping. It saves time and has better prices too,” Ms. Boado told BusinessWorld via online correspondence.

Since the coronavirus disease 2019 (COVID-19) came into the country last year, consumers suddenly have shifted from physical means to online ones. As many stayed at their homes during the quarantine, they have turned to online platforms to shop for items. Online channels of banks and electronic wallets, likewise, have been further tapped to pay and transfer money.

Now, as the ‘new normal’ proceeds under less strict quarantine, going digital in terms of shopping and banking is being integrated into Filipinos’ lifestyles in the long term.

In the earlier periods of the quarantine, malls limited their operations to essential stores such as supermarkets and groceries, leaving most brick-and-mortar (B&M) stores closed. This left retail losing a vital channel of reach and revenue.

“The prolonged lockdown has shown up in the reduced revenues of almost all retailers. Sales have dropped between 50-80% from pre-pandemic levels,” Roberto S. Claudio,  a vice-chairman of the Philippine Retailers Association (PRA), was quoted as saying in a year-ender report of BusinessWorld last December.

Mr. Claudio also stressed that while online sales increased from 100-500% from online capable retailers, it was not enough to cover for the lost sales in B&M stores.

Growth in e-commerce

Nonetheless, the e-commerce trend has visibly boomed as consumers shifted their shopping online.


As Oxford Business Group (OBG) cited in their “Philippines 2021” report, a survey by creative agency We Are Social and social media management platform Hootsuite in July 2020 revealed that 78% of Filipino consumers had made an e-commerce purchase. This is 4% higher than the firms’ figures in January 2020, a few months before the March lockdown. 

Also, Kantar Philippines’ most recent quarterly FMCG Monitor reports showed steady progress in using online channels in spending for fast-moving consumer goods.

While direct sales were found to be hard hit, the share of online channels thrived in June 2020, with 27% change in year-to-date (YTD) compared to 2019. Last September, this share grew to 48% significant growth in YTD compared to 2019.

Raymund Alimurung, chief executive officer of Lazada Philippines, observed that the pandemic has served as a tipping point for e-commerce.

“It’s a little bit morbid to say, but the pandemic has been the best advertising for e-commerce. It’s not something out of desire, but out of necessity,” Mr. Alimurung said during the BusinessWorld Virtual Economic Forum last November, adding that many who have been exposed to e-commerce during lockdown are now realizing its convenience.

For Ms. Boado, the pandemic has pushed her further from shopping in physical stores to shopping online. “Prior to the pandemic, I’ve already been an avid fan of shopping online since I can easily compare prices of products from different shops; read their reviews; [and] get cash backs, coins, and vouchers. Plus, the thought of waiting for the package to arrive right at my doorstep excites me,” she shared.

E-commerce’s potential, B&M’s return

Compared to its Asian neighbors, however, more room is still seen for e-commerce to grow in the Philippines and in Southeast Asia. A report by Kantar Worldpanel Division Asia shows that the adoption rate of e-commerce in the region is “still limited to 1 in 10 households”. Moreover, the penetration rate of e-commerce in the Philippines is 7.3% last September, way behind the numbers of its neighbors like China, Korea, and Taiwan. 

On the bright side, about 70% of Filipinos surveyed said they shop online because of epidemic concern, and 50% claimed they will shop more online.

In addition, OBG’s report mentioned a survey by Visa indicating that “73% of Filipino consumers are likely to sustain or increase their pandemic level of online shopping once restrictions are eased”.

Online shopping, while continuing to break ground in the country, is bound to be permanent among consumers. Yet, hope is still seen for B&M stores and, especially, malls, which fully reopened since June.

“I personally do not see online retailing completely taking over from in-store retailing. Retailing as an industry will become omnichannel,” Mr. Claudio of PRA was quoted as saying, adding that developing digital infrastructure will be an agenda for retailers who do not have it yet and opening showrooms with digital hubs is a possibility for e-commerce shops.

Mr. Alimurung also expects consumers to return to malls as markets open up. With e-commerce gaining traction during its ‘trial period’ during the lockdown, nonetheless, the trend will continue in the months ahead.

“[W]e expect to see [e-commerce penetration] growing. We see that in the types of brands boarding [and] the daily users that are going on [our platform]. These trends will just don’t go any other way,” he said.

Meanwhile, Lorenzo C. Formoso, also a vice-chairman of PRA, believes that the future of retail will rely on the developing response to the pandemic. “[T]his ‘new normal’ is not really normal until the advent of the vaccines and quick tests,” Mr. Formoso said in the latest World Retail Congress report. “We must remain optimistic as new developments are already taking place.” 

Acceleration in digital transactions

At the same time, shopping has gone further online for many consumers, digital channels have been further used by more individuals than before for transactions.

Ms. Boado shared that her online transactions increased since the pandemic. “I’ve transacted more, twice or even thrice than my usual transactions before the pandemic since most banks waived their convenience fees. This is really my preferred payment method not only for my purchases but also for paying bills and doing money transfers,” she said.

It has been stressed multiple times in the previous year that the country’s transition to cashless banking and electronic payments, or e-payments, has accelerated due to the pandemic.

In a fireside chat in the BusinessWorld Virtual Economic Forum, Bank of the Philippine Islands (BPI) President and CEO Cezar P. Consing observed firsthand the surge in digital transactions.

“The thesis that COVID accelerated cashless society is true,” Mr. Consing said. “It was all very slow at first, very gradual, incremental growth. All of a sudden, we saw daily digital enrollments from our customer base to the tune of 20,000 to 30,000 a day. Because of all of these enrollments, more than half of our 8-9 million customers are now enrolled digitally.”

The BPI president also noted that the bank’s transactions by volume done through ATMs, online, or mobile grew from about 70% pre-COVID to over 90% upon the start of the lockdown. Physical branches still account for the bank’s bulk of transactions in terms of value, he continued, but the volume of branch and ATM transactions remained lower than pre-COVID levels.

Data from Bangko Sentral ng Pilipinas (BSP), meanwhile, showed big increases in the value and volume of e-payments facilitators PESONet and InstaPay.

According to the central bank’s governor, Benjamin E. Diokno, the value of PESONet jumped 100% year-on-year, while the value of InstaPay increased to almost 400% for the first eight months of 2020. In terms of volume of transactions, PESONet increased by 130%, while InstaPay jumped by 624%.

“This is truly excellent news. As governor of the BSP, one of my personal goals is to have not less than 50% of transactions, by volume and value, to be done digitally by 2023. With the pandemic, I am optimistic that this goal will be met even sooner,” Mr. Diokno said during the Digital Banking Asia webinar last November.

Advancing the ‘cash-lite’ vision

Pushing further Mr. Diokno’s vision of a cash-lite economy in the country, BSP unveiled last October its Digital Payments Transformation Roadmap 2020-2023, which intends to set out initiatives and strategies for advancing an “efficient, inclusive, safe and secure digital payments ecosystem.”

The roadmap targets to strengthen preference for digital payments by digitizing half of the total volume of retail payments and by expanding the number of the financially included to 70% of Filipino adults. It also aims for BSP to improve access to more innovative digital financial products and services.

These objectives are intended to be met by developing digital payment streams to accelerate wider acceptance, establishing the necessary digital finance infrastructure to facilitate interoperability in the digital payments ecosystem, and implementing digital governance standards to safeguard the integrity and privacy of consumer data.

Alongside this roadmap, Mr. Diokno continued in his speech, BSP sets to pursue more digital payment initiatives in the near term. One of these initiatives is extending the QR Ph use case from only person-to-person (P2P) payments to person-to-merchant (P2M) payments. 

“Since accepting payments via QR is simple and affordable, it is expected to benefit not only large business organizations but also the small unbanked vendors such as peddlers, sari-sari store owners, and other entrepreneurs,” Mr. Diokno said.

Other initiatives include simplifying bill payments through a “one bills payment facility”, streamlining payments between businesses and consumers through the “request to pay service”, and making recurring payments less hassled through a direct debit use case.

The central bank is also proactively building a conducive regulatory environment for digital innovations, primarily digital banks. Late November, BSP’s monetary board approved the recognition of digital bank as a new bank category that is separate and distinct from the existing bank classifications.

“Digital banks will play an important role in the digital financial ecosystem. We see these banks as additional partners in further promoting market efficiencies and expanding access of Filipinos to a broad range of financial services, bringing us closer to the realization of our target[s],” Mr. Diokno said in a separate statement.

Blended banking

For its conveniences and efficiencies, coupled with strong support from the BSP, digital banking and electronic payments are expected to be a permanent feature for consumers in the new normal.

For Ms. Boado, online transactions will be a permanent fixture in her routines. “In this time and age, almost everything is within reach and can be done with a single tap — even available 24/7,” she shared. “Convenience will always be my top priority, so doing transactions online will surely be my long-term option.”

For Mr. Consing, there is no going back to analog means of banking for many. Yet, he looks forward to a hybrid of analog and digital for banking moving forward.

“Come the vaccine, I think it will be a combination of high tech [and] low touch,” he said, stressing the term “phygital”, or physical and digital combined.

“The volume of digital transactions is high, but the bulk of the value is still being supplied by the branches. Over time, that value in digital transactions will also grow a lot, so [it] will create as much value, if not more, than the physical,” he added.

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