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Finance Secretary Benjamin E. Diokno called upon the international community to swiftly transition to digital payments as a strategy to accelerate climate action during an event at the 2023 United Nations Climate Change Conference (COP28) last week.
With the backing of the United Nations’ Better Than Cash Alliance, the event, named “Responsible Digital Payments to Accelerate Climate Action”, served as a platform for unveiling a new global call to action. This call urged governments, humanitarian organisations, and international financial institutions to support emergency response and climate resilience through inclusive digital payments. The Philippines joins the international community in this global call to action, Diokno stated.
The pivotal role of digitalisation lies in expediting payments to communities affected by disasters or residing in disaster-prone areas. It ensures that payments can quickly reach individuals, regardless of their location.
It can help unlock greater efficiency and provide a wider array of options for beneficiaries of social protection programmes. For example, the Philippines’ Pantawid Pamilyang Pilipino Programme (4Ps) provided rapid relief to affected sectors of the country through digital cash transfers. Even development partners who employed the 4Ps’ digital payment platform for emergency responses found that they were able to achieve a substantial reduction in both administrative and transaction costs.
Given its location in the typhoon belt and the Pacific Ring of Fire, and with approximately 60% of its population residing along coastlines, the Philippines consistently faces unavoidable losses and damages. Over the past decade, the country has incurred around US$ 10 billion in costs attributable to climate-related hazards.
Typhoon-related annual losses in the Philippines have been estimated at 1.2% of the Philippines’ gross domestic product (GDP). It is anticipated that around US$ 3.2 billion per year will be lost due to the impact of future typhoons and earthquakes.
These substantial figures have prompted the government to investigate and create innovative solutions aimed at ensuring a climate-resilient future for the Philippines, Diokno explained. The Department of Social Welfare and Development (DSWD) collaborated with the World Bank (WB) to initiate the Beneficiary FIRST (Fast, Innovative, and Responsive Service Transformation) Social Protection Project. The project aimed to establish digital data governance and implement digital payments, including transactional accounts for 4Ps beneficiaries.
Meanwhile, the Department of Finance devised the Philippines Disaster Risk Financing and Insurance Strategy, offering a comprehensive framework for the deployment of financial protection solutions at the national, local, and individual levels.
“The Philippines recognises that improving climate resilience and disaster response through digital payments requires digitalisation of social safety nets. This includes improving financial services and infrastructures for digital payments, among others,” Diokno noted.
The government is committed to promoting digital transactions across all government agencies, particularly at frontline offices such as local government units (LGUs). In 2020, when he served as Central Bank Governor, Diokno led the launch of the Digital Payments Transformation Roadmap. It outlined initiatives and strategies designed to establish an efficient, secure, and inclusive payments ecosystem in the Philippines.
As a part of its targets, the Bangko Sentral ng Pilipinas (BSP) aimed to convert 50% of all retail payments into digital form by 2023. According to the 2022 Status of Digital Payments BSP Report, digital payments accounted for 42.1% of total retail payments by volume, marking a significant increase from 30.3% in 2021.
