Philippines eyes cross-border payments with ASEAN peers

MANILA, Philippines — The Philippines is pursuing seamless and low-cost cross-border payments with other member countries of the Association of Southeast Asian Nations (ASEAN), particularly Malaysia and Thailand.

In a virtual forum, BSP assistant governor Edna Villa said the Philippines and Singapore signed an enhanced innovation function cooperation agreement last week, upgrading the first partnership signed in 2017 that focus more on information sharing and a referral system for country innovators.

“The upgrade of the agreement dovetails really well with the goal of ASEAN leaders to facilitate payments integration in the region, that would usher further ASEAN economic integration,” Villa said.

Data showed ASEAN is now the fifth largest economy in the world with a combined gross domestic product (GDP) of $3.2 trillion in 2019. The region’s total merchandise trade grew four times over the last two decades to reach $2.8 trillion in 2019.

Intra-ASEAN trade continuously accounted for the largest share of ASEAN total trade at 22.5 percent in 2019, while tourist arrivals has also been on an increasing trend.

“Given these, ASEAN member states have agreed to prioritize the establishment of interoperable cross-border real time payment systems which can support the increasing globalization of trade and investments as well as growing tourism and manpower mobility in the region,” Villa said.

Villa said the 2021 “Agreement 2.0” with Singapore now includes collaboration specifically in payments innovation to facilitate the linkage of the payment systems of the Philippines and Singapore.

BSP Governor Benjamin Diokno and Monetary Authority of Singapore managing director Ravi Menon signed the agreement last week.

While the modality of the linkage is bilateral in nature, Villa explained the vision is to base the bilateral arrangement on principles that would also be suitable for multilateral linkages, in order to help future proof the linkage.

“The BSP has been in dialogue with several ASEAN central banks to make the seamless flow of funds between our countries a reality. We have chosen Singapore as our starting point for this linkage,” Villa said.

According to Villa, the Philippines could learn from Singapore’s experience in bilateral and multilateral payments connectivity. The agreement aims to link the InstaPay of the Philippines with PayNow of Singapore.

Villa said the Philippine central bank would continue to provide an enabling regulatory environment that fosters the development and use of pioneering solutions in the financial and payments services industry while ensuring that the related risks brought about by these innovations are properly identified and timely managed.

Raymond Estioko, director of the BSP’s Payment System Oversight Department, said there is a constant communication with ASEAN neighbors to also enter cross-border agreements, but Singapore was just the first due to its bilateral and multilateral experience as far as payments connectivity is concerned.

“Gauging on the economic activity or the transactions between countries, it’s either Malaysia and Thailand,” Estioko said.

The beneficiaries include overseas Filipino workers (OFWs), export, import and tourism businesses as well as firms with affiliates or investors abroad.

Under its Digital Payments Transformation Roadmap, the BSP aims to convert 50 percent of total retail transactions to electronic channels and increase the number of Filipino adults with bank accounts to 70 percent by 2023.