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The Philippines’ BSP Pushes for Digitalisation of Bank Transactions

The Philippines’ Bangko Sentral ng Pilipinas’ (BSP) has a vision for the country to become a digital-heavy, cash-light society to help achieve inclusive growth. According to the BSP, 50% or half of all transactions should be digital by 2023, and 70% of Filipino adults should have formal bank accounts by 2023.

The BSP highlighted how the pandemic has been a catalyst for financial digitalisation, as mobility restrictions prompted more people to use digital payments. In 2020, over 4 million new electronic financial accounts were created in the Philippines. Cybersecurity is also top of mind for the BSP as it seeks to build public trust in digital banking, adding that digitalisation measures go hand in hand with ensuring a safe cybersecurity environment with fintech institutions facing the same regulatory environment as banks.

BSP further explained that the government’s strategy to increase internet access across the country is concurrent and crucial to the BSP’s efforts to expand financial inclusion. The country’s central bank also provided detail on how they are running financial and digital literacy programmes with local communities such as fishermen and state institutions including the Civil Service and Philippine National Police (PNP).

The BSP expects a further surge in the use of digital platforms for payments and in the number of Filipino adults with financial accounts over the near term, highlighting that the BSP is on track with its financial inclusion and digitalisation goals. They also recognise the importance of the country’s National ID System (PhilSys), in which mass registration is ongoing. This will help facilitate the Philippines’ digitalisation and financial inclusion goals. The PhilSys will squarely address the problem of lack of formal IDs among the marginalised, which is a major barrier for them to open a bank or financial accounts, the BSP added.

Accordingly, the BSP’s Digital Payments Transformation Roadmap 2020-2023 (DPTR) says that the BSP’s thrust to promote financial inclusion and digitalisation of payments is mutually reinforcing: they go together, each enabling the other. With the sudden onset of the COVID-19 global pandemic, the shift towards digital payments has become imperative as physical distancing rules become the norm under the “New Economy” environment. By using digital payments with due care and vigilance, Filipinos reduce the need for mobility and prevent health risks from face-to-face and over the counter (OTC) financial transactions. The greater usage of digital payments will also facilitate the growth of Fintech businesses engaged in e-commerce businesses as the consumption of goods and services is increasingly driven by online purchases.

The BSP’s DPTR strategic outcomes are the following:

  1. Strengthened customer preference for digital payments by:
  • Converting 50% of the total volume of retail payments into digital form, considering that payment services are the gateway of most Filipinos to the formal financial system. This shift can be made by offering customers faster and more affordable payment options that provide greater convenience.
  • Expanding the financially included to 70% of Filipino adults, by onboarding them to the formal financial system using payment or transaction accounts. With the use of these accounts over time, they can build financial profiles with their payment service providers (i.e., banks and non-bank e-money issuers).
  1. More innovative and responsive digital financial services characterised by (1) innovation-driven use of consumer data to design financial products and services that are responsive to the needs of consumers, including those from the lower-income sectors: (2) PhilSys-enabled Know-Your-Customer (KYC) to allow more individuals to access financial services; and (3) availability of a next-generation payment and settlement system to facilitate real-time processing of financial transactions of the banking public and the Philippine economy.
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