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BSP’s strategic thrusts for digital financial inclusion

Digital technology is becoming an inevitable part of the day-to-day lives of every Filipino.

Data from the global mobile network industry show that in 2019, 67% of Filipinos had a social media account and used the Internet, while those with mobile broadband and smartphone stood at 86% and 65%, respectively. Mobile phones have enabled a wide array of services on demand whenever, wherever—whether for streaming movies, buying stuff, ordering food, or connecting with friends and families.

Such utility of mobile phones is also envisioned to democratize access to financial services and address exclusion, considering that 70% of the unbanked own a mobile phone. Based on the 2017 Financial Inclusion Survey, more than two-thirds of Filipinos do not have a formal account, leaving them unable to fully benefit from the gains and opportunities in an increasingly digital and growing economy.

The promise of digital technology needs to be deliberately harnessed to pave the way for greater financial inclusion. Toward this end, the BSP pursues three strategic thrusts: building an inclusive digital finance ecosystem, creating compelling use cases for financial inclusion, and fostering financial literacy and trust in the financial system through consumer protection.

Building an inclusive digital finance ecosystem

An inclusive digital finance ecosystem is one that enables market players to viably serve the varying needs of the populations, particularly the low-income sector. This necessitates democratizing the transaction account as a gateway to broader digital financial services (DFS) through the affordable and easy-to-open basic deposit account (BDA); enabling expansion of low-cost access points through cash agents, or third-party retail outlets tapped by banks where clients can open an account and conduct simple banking transactions; and developing an efficient retail payments system that serves as the backbone of digital finance innovations to facilitate affordable, safe, fast, and convenient small-value, account-to-any-account electronic fund transfers through the InstaPay and PESONet facilities under the National Retail Payment System (NRPS).

With the enabling policies in place, there are now 119 banks offering the BDA to more than three million depositors while cash agents are fast becoming ubiquitous, reaching a total number of least 17,000. Clients of PESONet and InstaPay—of which there are respectively 55 and 45 participating institutions at present—can now easily receive and send funds digitally through their accounts and mobile wallets.

Creating compelling use cases for financial inclusion

To drive account ownership among all Filipinos, there is a need to ensure that not only is an account accessible for the low-income sector, but also compelling and relevant to their needs and context. Accordingly, the BSP continues to work with various government agencies to shift from cash-based to account-based digital payments of social benefit transfers, wages, bills, purchases and transport fares—transactions made by most Filipinos.

For instance, the BSP has been coordinating with the Department of Social Welfare and Development (DSWD) to use transaction accounts for the efficient distribution of cash grants under the Pantawid Pamilyang Pilipino Program (4Ps). Receiving government assistance in a convenient and speedy manner is a powerful incentive for opening and using an account. This has been clearly demonstrated in the implementation of the Social Amelioration Program (SAP), which provided cash aid to millions of poor Filipino households adversely affected by the COVID-19 pandemic. The crisis and the massive government cash assistance programs that came with it have made account ownership and digital payments no longer just an option but a necessity understood by all.

The BSP is also working with the Department of Labor and Employment (DOLE) to push private sector employers to pay wages through transaction accounts. Following the financial inclusion forum for the labor sector co-hosted with BSP in November 2019, DOLE will issue in 2020 a labor advisory on digitizing payments of wages and salaries.

Under the guidance of the BSP, the payments industry has also launched the QR Ph as the national QR code standard to promote adoption of digital payments among microentrepreneurs, including market vendors and tricycle drivers.

Fostering financial literacy and trust in the financial system through consumer protection

Fostering trust and financial literacy aims not only to ensure that usage of financial services leads to improvement of welfare, but also to sustain demand for well-designed financial services, which, in turn, further drive financial inclusion. The BSP has forged strategic institutional partnerships within and outside the government to ensure sustained and effective delivery of financial education programs to targeted groups.

Digitalization of the financial system is giving way to more options made available by various financial service providers, making it imperative to bolster consumer trust and confidence in the security of e-payments and other technology-enabled financial transactions. With this in mind, the BSP is strengthening its digital literacy program aimed at increasing the awareness and capacity of consumers to use DFS, as well as consumers’ ability to protect themselves and financial service providers from the potential risks and threats arising from DFS usage.

In tandem with promoting financial literacy is fostering trust in the financial system by encouraging good market conduct. The BSP issued Circular No. 1048 establishing guidelines that institutionalize consumer protection as an integral component of corporate governance and culture, as well as risk management.

To bring its work closer to the people, the BSP has also developed its own chatbot, the BSP Online Buddy or BOB. BOB was designed to enable the public to engage the BSP through social messaging platforms for faster assistance, as well as allow BSP to gain better insight into customer experience and business practices.

As it pursues its strategic thrusts, BSP will continue to leverage on the National Strategy for Financial Inclusion (NSFI) as a vital platform for this whole-of-nation undertaking.

Topics: Bangko Sentral ng Pilipinas , Benjamin Diokno , Economy , Digital economy , National Strategy for Financial Inclusion , Financial system
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