Moving towards digitized retail payments

By Joshua Lao

As the world’s economies gear towards digitalization and e-payment system, the country’s central bank, the Bangko Sentral ng Pilipinas (BSP) has no intention of allowing the Philippines to be left behind in the emerging trend. The BSP launched the National Retail Payment System (NRPS) which aims to promote e-payment transaction in the country.
The system also intends to migrate micro, small and medium enterprises (MSME), which comprise more than 90 percent of the country’s establishments, from traditional cash transactions into digital methods by enrolling them in NRPS.

The goal is to uplift the lives of the MSME by giving them access to financial services as well as increasing their competitiveness.

However, according to Carmelita Araneta, the general manager of the Philippine Payments Management Inc. (PPMI), a huge 90 percent of the current retail payments in the country are still paper-based which includes cash and cheques while digital payments only accounts to less than 10 percent.

She explained there are already 112 banking institutions that have adopted digital payment modes whether via mobile or the internet. More than half of those are rural banks that provide mobile e-payment systems and caters mostly to MSME.

In addition to this, BSP statistics also showed there are about eight million active e-money subscribers and a whooping amount of P481.7 billion on e-money inflow and P481.0 billion on e-money outflow in 2017.

To energize the acceptance of digitized retail payments, the BSP established two automated clearing houses (ACH) under the system namely, InstaPay and PESONet. Both ACH seek to provide the banking and financial community with an infrastructure that will support and promote the use of e-banking products and other related services.

To date, some BSP supervised Financial Institutions (BSFI) are already enrolled in the ACH. PESONet and InstaPay have 42 and 12 BSFI respectively that can both send and receive funds.

QR code for inclusion

According to Vicente De Villa, officer-in-charge of the fintech unit, he is looking forward to speed up the adoption of the national QR Code standard to further boost the development of the country’s payments and settlements system.

BSP Governor Nestor A. Espenilla Jr. said the QR code will allow an efficient retail payment system that has the potential to transform the economy through the efficiency it brings to business transactions and the savings generated from a shift from paper-based to digital instruments.

He added the system would benefit the consumers and businesses in terms of the affordability, convenience and speed of payment services – the most basic and most used financial service.

“This is financial inclusion,” he said.

Fintech unit

Meanwhile, the central bank also put forward a financial technology (fintech) unit under the Financial Supervision Sector to oversee fintech companies. This fintech unit houses two offices, the Payment System Oversight Department (PSOD) and the Core Information Technology Specialist Group (CITSG).

The PSOD’s functions include drafting relevant policy development for a safe, efficient and reliable national payment system as well as to formulate, develop and enforce a comprehensive oversight framework to cover all BSFIs and other participants involved in NRPS.

On the other hand, CITSG will handle all the IT and cybersecurity needs of BSFI, e-banking, e-money licensing and policy development as well as ensuring the safety and integrity of the BSFIs technology risk management processes and operations.

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