Why small shops in the Philippines shun merchant accounts

Nerissa Elamil, who runs a vegetable shop in Quezon City, Philippines, says less than 10% of her store’s daily transactions, which range from US$260 to US$460, are cashless.

When they are, payments are made directly to her personal GCash e-wallet.

She’s not alone. About 90% of the 980,000 MSMEs in the country don’t use a business or merchant account with any formal financial institutions, as per a 2023 study by the Philippines’ central bank (BSP).

While cashless payments have accounted for the majority of all formal transactions in the country since 2023, some business owners from Quezon City – its most populous city – say cash remains king.

The cost of keeping a merchant account may be “unmanageable” for a lot of micro and small entrepreneurs, Deputy Governor Mamerto Tangonan of the BSP’s Payments and Currency Management Sector tells Tech in Asia.

For instance, a laundromat owner on the same street as Elamil turned down a GCash sales representative’s offer for a merchant account, citing the associated fees.

GCash is the largest e-wallet in the country, with 94 million users. It also offers merchant accounts so business owners can accept payments from any e-wallet or bank account for up to 500,000 pesos (US$8,798) a month.

A merchant account typically charges a 2% to 3% rate per transaction, but a personal account can receive funds for free. However, personal accounts can receive only up to 100,000 pesos (US$1,760) in funds per month.

Some small business owners have devised a workaround. The laundromat owner, for example, now manages two personal accounts on GCash.

Payment aggregators need to offer “value-added services that could complement the needs of a business owner,” Tangonan points out.

They risk keeping their business stagnant if they don’t, stakeholders say.

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