Philippine financial institutions must simplify the onboarding process for small businesses such as mom-and-pop stores to further expand the adoption of digital payments in the country.

Speaking at a forum on Wednesday, Rizal Commercial Banking Corp. Executive-Vice President and Chief Innovations and Inclusion Officer Angelito M. Villanueva said multiple requirements for merchant onboarding are among the biggest barriers to digital payments adoption in the sector.

"And now we're saying, if there could be a more simplified process of maybe just requiring a micro-merchant to present a PhilSys ID — given the fact that he or she is also an individual anyway with a livelihood or a small business — for (them) to be onboarded as a merchant," Mr. Villanueva said.

"That will definitely simplify the process and also expand ways by which we could now further amplify or expand the ecosystem," he added.

A recent central bank memorandum already allows for such streamlining. Under the memorandum, Bangko Sentral ng Pilipinas (BSP)-supervised institutions may simplify due diligence when onboarding low-risk small or informal merchants. This includes requiring only the merchant's national ID and their proof of legal business, such as barangay permits, self-attestation, digital storefronts, social commerce profiles, or sustained wallet activity.

Russell Toth, an associate professor at the University of Sydney and economist at Innovations for Poverty Action, said the Philippines' micro-merchant digital payment adoption problem is "two-sided." He noted that consumers are hesitant to pay digitally as they believe merchants prefer cash, while merchants are reluctant to accept digital payments because they assume customers are unwilling to use them. Closing that gap requires stronger coordination among merchants and consumers, as well as between merchants and their suppliers, Mr. Toth added.

That makes onboarding changes only one part of a broader rollout challenge: digital payments adoption depends not just on account setup, but on building enough merchant and customer usage to make acceptance routine in day-to-day transactions.

BSP Assistant Governor for Payments and Currency Development Redentor C. Bancod said slow digital payments adoption among micro-merchants reflects structural issues rather than pricing issues.

"It requires a whole-of-government approach, so we're collaborating and coordinating with our fellow government agencies in terms of pushing for merchant payments," Mr. Bancod said.

The central bank has at least 50 ongoing initiatives for payments innovation, Mr. Bancod added, while noting that they still have a "long way to go."

The BSP's 2025 Status of Digital Payments report showed merchant payments rose by 33.22% year on year to 2.93 billion from 2.2 billion in 2024, accounting for the bulk of digital transactions last year at 74.31%. The value of merchant payments, however, plunged by 54.24% to $13.2 billion (P815.4 billion) from $28.8 billion (P1.8 trillion) a year ago.

Part of the merchant payments growth was supported by the nationwide expansion of the Paleng-QR Ph Plus Program, with 1,435 local government units onboarded as of last year. The Paleng-QR Ph Plus was established to promote the adoption of the country's national quick response (QR) code standard among micro, small and medium enterprises, including market vendors and tricycle operators and drivers.

— Katherine K. Chan