The Philippines’ Internet Transactions Act (ITA), now in its early stages of implementation, arrived at a critical juncture. The Southeast Asian country being the 28th largest e-commerce market in the world, with forecasts of its digital economy growing by 30 percent annually until 2025. The Philippine Development Plan 2023-2028 also states that the development of a vibrant innovation ecosystem is a key priority.

The goals: to protect consumer rights, manufacturers, and data privacy, encourage innovation, ensure secure online transactions and fair competition, and monitor standards and product safety. The law covers all B2B and B2C Internet transactions when at least one of the parties is located in the Philippines. Consumer-to-consumer (C2C) transactions and online media content are not subject to its regulation.

Special features of the new measure include the creation of an Electronic Commerce Bureau under the Department of Trade and Industry (DTI), which will serve as the central authority for regulating e-commerce and managing consumers and producers in the Internet space as well as the creation of the Philippine E-Commerce Trust Seal, which will signal the safety and security of a merchant’s online transactions. The DTI will deal with violators of the law by deleting the website/platform, subpoenas, blacklisting, imposing fines, etc.

The ITA also includes measures to protect manufacturers by preventing customers from canceling transactions for items they have already paid for, items that are perishable, or items that are held by a third-party delivery service. Cancellation of transactions can only be carried out if there is a corresponding agreement or if the cost of the delivery service is refunded.

Thus, the introduction of this law will lead the buyer to reduce the level of online fraud, expand the ability to verify the seller before purchasing a product or service on the Internet (through the creation of an online business database), and accelerate the resolution of situations with violation of buyer rights (thanks to the government-wide system filing complaints).

The benefits for market players: closer to perfect competition (formed by the announcement of clear rules and standards for all sellers), the ability to use a new method to increase competitiveness and attract customers (Philippine Trust Seal), and optimizing part of the costs (due to the introduction of cancellation rules for transactions for buyers). Thanks to the law, e-commerce in the country promises to become more stable, reliable, and trusting in terms of relationships between sellers and consumers.

More than e-commerce, however, the ITA promises to become a significant driver of the development of fintech segments related to e-commerce — digital-forward banking, e-wallets, and digital lending.

For digital-forward banking, establishing trust between the population and online businesses will bring new clients into the sector who, knowing that they are protected by law, will begin to actively use these services to make purchases on the Internet (in 2022, 27 percent of consumers used card payments for e-commerce purchases). Additionally, new e-commerce entrants are more likely to open a bank account with a digital-forward bank, as opening a bank account in the name of a business with a traditional bank can (and will) involve the hassle of collecting a large amount of paperwork.

The situation will be similar with e-wallets, whose clientele will also grow. The reason for this is increased convenience, security (due to data encryption methods), and reduced time for placing an order. Convenience and time reduction are explained by the absence of the need to manually enter payment details each time when making a purchase. Wallets are currently the most used payment method for e-commerce purchases in the Philippines (31% of shoppers prefer it), which supports the theory of their future popularity among new customers in the sector.

The development of digital lending is expected to be driven by the increased use of personal loans and ‘buy now, pay later’ arrangements to pay for large purchases. These services provide consumers with a convenient and secure way to make online purchases without having to worry about immediately “lightening the wallet” for a large amount of money. For the seller, these payment methods bring benefits in the form of an increase in the average order value. The benefits for both parties to the transaction are determined by the popularity of this digital lending platform and its further spread.

To sum it up, ITA is not only a much-needed piece of legislation but a commercial opportunity for everyone. With its introduction, consumers gain protection and greater choice, e-commerce businesses gain a fair and favorable competitive environment, and the fintech sector gains customer influx and further growth opportunities for its individual product categories.

Rose Arreco is the business development manager of Digido.

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