BSP, BAP push digitalization

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) and the Bankers Association of the Philippines (BAP) continue to foster digitalization in the country as more Filipinos embrace electronic channels in their daily lives.

In a pre-recorded message during the Finance Philippines forum organized by The Asian Banker, BSP Governor Felipe Medalla said the regulator’s policy agenda on digitalization continues to make the financial system more inclusive and efficient.

Under its Digital Payments Transformation Roadmap, the central bank 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.

“There has been accelerated growth in the adoption of digital payments. For 2021, the share of digital payment transactions to total transactions grew to 30.3 percent. Meanwhile, the value of digital payments increased to 44.1 percent,” Medalla .

Latest data showed the share of digital payments to total retail transactions increased to 30.3 percent last year from 20.1 percent in 2020, while the number of banked Filipino adults almost doubled to 56 percent last year from 29 percent in 2019.

Aside from welcoming digital banks to push digital transformation, the BSP chief said the regulator is pushing for the development of a digital financial marketplace model.

The framework that builds on the open finance, Medalla said, would set forth, among others, the criteria for the grant of authority to engage in digital marketplace operations and  related supervisory expectations.

To be well positioned to respond to emerging risks and challenges, Medalla said the BSP also leverages on supervisory technology (suptech) in its operations via applications, supporting faster and more flexible data capture compared to the traditional template based approach.

“In turn, this allows for earlier detection of potential risks and improved supervision. Related to this, the BSP has rolled out our regulatory sandbox framework to better understand and supervise emerging technologies and business models,” Medalla said.

Through the framework, the regulator is able to ensure that financial innovations are scrutinized prior to deployment to the public.

BAP president Antonio Moncupa Jr. said that the pandemic served as a sliver lining as it accelerated the country’s digital journey.

“There is a feeling that the pandemic is fading and that we are starting to normalize and increasingly we are going back to business of business,” Moncupa said.

Moncupa, who is vice chairman of Gotianun-led East West Banking Corp., said the volume of digital transactions in the country is more than the combined checking and ATM transactions.

Moncupa reported that checking transactions plunged to 234,000 per day in 2020 and further to 109,000 as of end-July this year from 720,000 per day in 2019.

On the other hand, PESONet electronic fund transfer transactions jumped to 330,324 per day from only 18,000 when it was launched in 2018 under the National Retail Payment System (NRPS).

“The combined InstaPay and PESONet are far, far larger than the combined check and ATM transactions. I though this is significant. The significance is not in the value and the volume, but rather it is psychological and cultural,” Moncupa added.

According to the BAP president, the wider acceptance of these most basic digital payments mechanisms via mobile and online continue to price the financial services ecosystem towards digital adoption.

Despite the entry of new players, particularly financial technology (fintech) providers challenging banks, Moncupa said the Philippine financial system and capital markets are still predominantly bank-centric.