Revolutionizing the payments and settlements system
The Bangko Sentral ng Pilipinas celebrates its 30th anniversary with significant milestones in the country’s payments and settlements system. With an enabling regulatory environment that leverages technology, the system has made payments and fund transfers efficient, fast, and safe for Filipinos.
In 2022, the share of monthly digital payments to total monthly retail payments volume in the Philippines reached 42.1 percent, up from 30.3 percent in 2021. Moreover, as of 2021, about 56.0 percent of Filipino adults owned a formal financial account compared with 29.0 percent in 2019.
Besides keeping prices stable, supervising banks, and maintaining the stability of the entire financial system, another crucial role of the BSP is overseeing the country’s payments and settlements system.
Broadly, this mandate of the BSP is centered on ensuring that payments and fund transfers of individuals, businesses, and other entities are completed on time and without issues. This requires monitoring the channels of banks, e-wallets, and clearinghouses through which financial transactions are made.
A robust payments and settlements system is essential for the effective implementation of monetary policy, efficient financial markets, and economic growth.
Payments and settlements system oversight: then and now
The enactment of the New Central Bank Act in 1993—which established the BSP to replace the old Central Bank of the Philippines—paved the way for a more sophisticated payments and settlements system. Since then, the BSP had established facilities for safe and fast electronic interbank payments and settlements for large-value, time-critical transactions.
In 2002, the BSP, through its Payments and Settlements Office, operationalized the Philippine Payment and Settlement System (PhilPaSS). PhilPaSS is a real-time gross settlement system for the processing and settlement of high-value payment transactions of commercial and rural banks. In the succeeding years, other institutions, such as investment houses, thrift banks, and financing companies, joined the roster of commercial and rural banks that enjoy the benefits of interbank and interdealer transactions.
Amid innovations in the financial landscape, the BSP launched the National Retail Payment System (NRPS) in 2015, which accelerated digitalization in the country’s cash-heavy retail payment system. The Philippine Payments Management Inc. (PPMI), which is recognized as the country’s payment system management body composed of industry players, was also established in 2017. PPMI supports the BSP in putting forward innovations toward a cash-lite retail payments system.
While the BSP has supervised the country’s payments and settlements system for years, additional regulatory powers were given to the BSP with the enactment of the National Payments and Systems Act (Republic Act No. 11127) in 2018. The act mandated the BSP to oversee payment systems in the country and exercise supervisory powers for the purpose of ensuring the stability and effectiveness of the monetary and financial system. A year after, this function was then institutionalized through the enactment of the amended BSP charter (Republic Act No. 11211). The law explicitly states that “the Bangko Sentral shall oversee the payment and settlement systems in the Philippines, including critical financial market infrastructures, in order to promote sound and prudent practices consistent with the maintenance of financial stability.”
With its institutionalized role, the BSP established the Payments and Currency Management Sector (PCMS) in 2021 to lead the Bank’s supervisory work in this area. The BSP, through the PCMS, pioneered innovative strategies in the digitalization of payments and accelerated the operationalization of the Digital Payments Transformation Roadmap (DPTR) for 2020-2023. Under this three-year blueprint, the BSP aims to see half of the retail transactions in the country done electronically and at least 70 percent of Filipino adults owning transaction accounts, including e-wallets, by the end of 2023. The twin goals are well within reach. Latest BSP data show that in 2021, about 30.3 percent of financial transactions were done electronically, and 56 percent of Filipino adults had transaction accounts, up from 14.0 percent and 29.0 percent, respectively, only one year ago before the COVID-19 pandemic hit.
Making payments efficient, safe, and inclusive
The digitalization trend comes amid the BSP’s efforts to pursue a payments and settlements system that is efficient, safe, and inclusive.
On efficiency, the BSP has rolled out initiatives that make electronic fund transfers easy. An example is the establishment of the two interoperable clearinghouses PESONet [Philippine EFT (Electronic Fund Transfer) System and Operations Network] and InstaPay. Through these platforms, a person may electronically transfer funds to an intended recipient even if their accounts are lodged with different banks or e-wallets.
Another example is the creation of digital payment streams EGov Pay and QR Ph. The EGov Pay is an electronic payment facility that allows individuals and businesses to digitally pay taxes, licenses, permits, and other obligations to the government. QR Ph, the national QR (quick response) code standard, provides an interoperable platform that allows QR-enabled fund transfers even if the sender and the recipient have accounts from different banks or e-wallets.
On safety, the BSP issued regulations and carried out campaigns that promote consumer protection and cybersecurity. The BSP also supported the passage of the Financial Products and Services Consumer Protection Act when it was still being deliberated in Congress. This law provides better redress mechanisms for financial consumers who have complaints against their service providers.
On inclusivity, the BSP, through its Financial Inclusion Office, has implemented policies and programs that made financial services more accessible to low-income earners and encouraged more people to open transaction accounts. At the fore of these initiatives is the Paleng-QR Ph Plus program, under which the BSP partners with the Department of the Interior and Local Government to urge local governments to promote digital payments in local wet markets, public transport, and other retail establishments.
As the speed and breadth of digitalization gain momentum, the BSP continues to pursue more innovative and inclusive strategies toward an efficient, safe, and inclusive payments and settlements system attuned to the evolving needs of Filipinos.