Of the many branches of fintech that can benefit society, the Philippines recognised the need to embrace digital payments as a means of fostering financial inclusion and economic growth. In response, the Bangko Sentral ng Pilipinas (BSP) launched the Digital Payments Transformation Roadmap (DPTR) 2020-2023, outlining key strategies to accelerate the adoption of digital payments in the country, over the course of three years. 

According to then-BSP governor Benjamin E. Diokno, the central bank intended the Roadmap to be a blueprint for “achieving an efficient, safe, and inclusive payments ecosystem.” 

With the original roadmap direction now nearing completion in 2023, we take a comprehensive look at the various milestones achieved and challenges faced.

Goals of the Digital Payments Transformation Roadmap

The Digital Payments Transformation Roadmap set two primary goals for the Philippine financial sector: first, to increase the share of digital transactions in total payment volume to 50% by 2023; and second, to ensure that 70% of Filipino adults have access to a transaction account. 

To achieve these goals, the BSP outlined several strategic initiatives, including regulatory reforms, infrastructure development, and financial literacy campaigns.

Achievements in Regulatory Reforms

National QR code standard – In 2020, the BSP established the Philippine QR (Quick Response) code standard, a system that allows seamless and secure fund transfers across various payment platforms. This move has made digital transactions more accessible, convenient, and user-friendly for both consumers and businesses.

With QR PH, Filipinos can make cashless payments for goods and services without the need for physical cash or payment cards, especially beneficial for people in remote areas or those who do not have access to traditional banking services. The interoperable QR PH standard also allows for the integration of various payment systems, making it easier for individuals and businesses to participate in the digital economy.

All financial institutions overseen by the BSP have been instructed to fully adopt QR PH by 1 July 2023, in accordance with the Digital Payments Transformation Roadmap.

Cross-border linkages — The BSP also seeked to establish cross-border payment agreements with other countries to facilitate cross-border trade, investment, tourism and to power remittance flows for the millions of Filipinos working abroad.

The central bank signed two agreements with the Monetary Authority of Singapore (MAS) to integrate the Philippines’ InstaPay and Singapore’s PayNow real-time payment networks in 2021, leveraging both countries’ QR standards to fast-track payments connectivity between the two nations.

This was followed shortly by the central banks of Philippines, Malaysia, and Thailand examining cross-border payment agreements to link their QR and real-time payment systems, before inking a pact with its neighbors Singapore, Indonesia, Malaysia, and Thailand to boost connectivity and ease payment flows between the five ASEAN countries.

Plans to make cross-border fund transfers cheaper, more transparent, faster, and interoperable between the countries are presently underway, under the Project Nexus solution developed by the BIS Innovation Hub in Singapore, which aims to go live in 2025.

Infrastructure Development and Innovations

PESONet and InstaPay– The launch of these automated clearing houses has facilitated real-time, affordable, and efficient fund transfers between financial institutions. These platforms have seen exponential growth in usage, with transactions reaching millions daily. Over PHP5 trillion of transactions were recorded through PESONet and InstaPay last year.

“The usage of PESONet and InstaPay has grown sharply, especially during the lockdown periods. Clearly, the trajectories of the PESONet and InstaPay volume and value reflect increasing consumer trust in these fund transfer services,” said former Governor Diokno in his speech to the Makati Business Club back in 2020. 

“For businesses, the InstaPay (sic) has been useful in the settlement of low-value yet urgent financial obligations,” he continued. “It is even more convenient to use with the availability of interoperable person-to-person or P2P QR codes, which follow the BSP-prescribed National QR Code Standard or ‘QR PH’.”

Leveraging InstaPay, the BSP launched the interoperable Bills Pay PH facility in November 2022, enabling consumers to settle bill payments using their own payment account, no matter what service provider the biller is using.

Interoperable retail payment system– The BSP has approved the licensing of the Philippine Payments and Settlements System (PPSS) as the first retail payment system operator. This move is expected to boost the safety, efficiency, and interoperability of digital payment services.

The central bank is also in the process of collaborating with the payments industry to introduce two new payment rails, the request to pay and direct debit facilities, before the end of the year to help push the financial inclusion goals tabled in the Digital Payments Transformation Roadmap. 

Request to pay will make it easier for payees to initiate collection of funds owed to them simply by sending a payment request to the payor. Meanwhile, direct debit will encourage users to better manage their regular commitments, authorising payments to be deducted directly from their accounts for recurring payments such as rent, monthly fees, insurance premiums and so forth.

Digital ID System – The Philippine Identification System (PhilSys) has been implemented to provide a foundational identification platform, comprising multiple data points including biometric data to securely identify account holders and prevent fraudulent uses. This national digital ID system not only simplifies transactions but also facilitates the opening of bank accounts and access to various financial services.

As of March 2023, over 77 million Filipinos have been onboarded to PhilSys, with their biometric data including fingerprints, iris scans, and front-facing photographs all successfully registered with the database. More than 26.3 million electronic Philippine IDs have been claimed, including 846,450 that were downloaded on mobile devices. 

All government agencies and private establishments will accept PhilSys as proof of ID in the Philippines, and all government institutions will integrate PhilSys into their processes and services, according to the Philippine Statistics Authority.

Financial Literacy and Inclusion

Financial education initiatives – The BSP, in collaboration with the Department of Education, has integrated financial literacy programs into the K-12 schooling curriculum. This initiative aims to instill financial management skills and awareness from an early age.

Financial inclusion campaigns– The BSP has been conducting nationwide campaigns to promote digital payment adoption, targeting unbanked and underbanked populations. These efforts have resulted in millions of new account openings and increased usage of digital financial services.

With a massively underserved banking population, the BSP now reports that over 41 million adult Filipinos now have access to bank and e-money accounts. At this rate, the central bank claims that financially including 70% of Filipino adults will be possible by end-2023.

The Way Forward

While the Digital Payments Transformation Roadmap has made significant progress in its goals, challenges remain. The country’s internet infrastructure and connectivity must continue to be improved to support the growth of digital transactions. 

In addition, the BSP must maintain its commitment to cybersecurity measures to protect consumers and maintain confidence in digital payment systems. Sustained efforts in financial literacy and inclusion are necessary to ensure that all Filipinos benefit from the digital payments transformation.

Featured image credit: Edited from freepik