By means of Luisa Maria Jacinta C. Jocson, News reporter
THE PHILIPPINES have achieved this Targeting to digitize 50% of all retail payments by the end of 2023, amid the rise in merchant payments, the Bangko Sentral ng Pilipinas (BSP) said.
The BSP’s 2023 Status of Digital Payments in the Philippines report released on Tuesday shows that the share of online payments in the total volume of monthly retail transactions increased to 52.8% in 2023 from 42.1% a year earlier.
This was slightly higher than the central bank’s target of digitalizing 50% of retail payment volumes by the end of 2023.
“If you remember, in 2013 only 1% of the 2.62 billion monthly retail payments were electronic. Ten years later, we are now more than halfway there,” BSP Vice Governor Mamerto E. Tangonan said at a briefing.
Last year, the volume of digital payments was 2.62 billion, slightly higher than the 2.35 billion non-digital transactions.
“Of the 5 billion monthly transactions, over 2.6 billion transactions were successfully converted to digital form, representing a substantial increase of 28.1% over the previous year,” the BSP said in its report.
Meanwhile, the value of digital payments reached $110.5 billion in 2023, surpassing the $89.3 billion in non-digital transactions.
“In terms of value, the latest e-payment measurement also showed that the share of monthly digital payments in total transactions increased from 40.1% in 2022 to 55.3% in 2023,” the central bank said.
The main contributors to the increase in digital payments were payments to merchants, which accounted for the largest share (64.9%) of monthly digital payment volume, equivalent to 1.7 billion transactions.
This was followed by person-to-person transfers (19.3% share or 505.3 million transactions) and business payments to suppliers (6.1% share or 160 million transactions).
“The Philippine digital payments volume is mainly driven by high-frequency, low-value retail transactions such as merchant payments and personal transfers,” Tangonan said.
“The growth is supported by the growth of person-to-merchant QR PH payments, which has increased almost threefold from 2022,” he added.
Mr Tangonan also attributes the increase in account-to-account transfers to the efficiency and convenience of e-payment facilities PESONet and InstaPay.
“Another important contributor that is slowly but surely catching up in the field of digitalization is supplier payments. It grew substantially in 2023, more than twice as high as in 2022. An observation that underlines the growing adoption and reliance on digital transactions in the corporate payments landscape,” he added.
The BSP aims to achieve a 60-70% share of digital payments in total retail payment volume by 2028, in line with the Philippine Development Plan.
“As you know, in every innovation lifecycle where we are now, we are above 50%. The next 20% would be just as challenging, if not more so the Ffirst 50%,” said Mr Tangonan.
He said the BSP is working on ways to expand the user base of digital payments by lowering costs and increasing consumer trust in online platforms.
REQUEST FOR PAYMENT
“We have launched several initiatives and many more are underway in the advancement of digital payments and the promotion of financial inclusion towards our end goal of a cashlite society,” Mr Tangonan said.
For example, the central bank is considering launching new facilities to further stimulate digital payment transactions.
“We are continuously digitizing person-to-person and person-to-business payments, and we are working with Philippine Payments Management, Inc. (PPMI) to make the request-to-pay (RTP) facility interoperable,” BSP Bridget Rose, M. Mesina-Romero, Director of the Payment Policy and Development Department.
This facility allows companies and consumers to better control outgoing payments and monitor their cash flow.
“RTP is a payment overlay service that enables secure messaging between a payee and a payer,” the BSP said.
“Each payment request is automatically linked to a dialogue chain that allows the payer to approve the request and thereby authorize payment of their account, or to reject the request, using the dialogue chain to explain the reason for this action. ”
In December 2023, the BSP launched the first use case for the facility, the InstaPay RTP cash-in service. It is planned to be fully implemented within a year.
The cash-in service allows users to “fund their own accounts or e-wallets by sending a request for funds to the originating financial institution while using the receiving financial institution’s digital platform.”
The BSP is also working on implementing the RTP facility for e-commerce platforms.
“As you know, e-commerce is growing very quickly and that is why we want to capitalize on that growth by ensuring convenient digital payments are available,” said Mr Tangonan.
Ms Mesina-Romero added that this initiative would also reduce the need for COD transactions for e-commerce purchases.
In addition to RTP, the BSP is also developing a direct debit facility.
“Direct Debit is a payment service that allows customers to better manage their recurring payments, such as monthly rental payments, loan repayments and insurance premiums, by simply authorizing billers to withdraw money from payers’ accounts,” the BSP said.
The facility will also help streamline collection eFfortresses and improving liquidity management” for beneficiaries.
“You don’t have to have multiple accounts to pay your diFThere are many obligations to the different financial institutions,” Ms. Mesina-Romero added.
The BSP aims to start the direct debit pilot this year.
TRANSIT PAYMENTS
Mr Tangonan said the central bank is also currently working with the Department of Transport to explore alternatives to transit payments.
“As you know, many of our Filipinos use public transportation and this is a very good opportunity for them to enjoy the benefits of digital payments by simply using their phones to pay the fare,” he said.
In addition, the central bank is also pursuing other measures to stimulate digitalization, such as its involvement in Project Nexus.
In March 2023, the BSP and four other central banks in the region announced that they will connect their domestic instant payment systems through the Bank for International Settlements’ Project Nexus.
“Although it has its roots in the ASEAN (Association of Southeast Asian Nations) region, the vision for Nexus is actually global. And we aim for the platform to connect with other countries or other regional platforms, including in the Middle East, Europe and North America,” said Mr. Tangonan.
The BSP also noted the PPMI’s latest initiative, which includes a third settlement cycle for PESONet transactions.
“It introduces a third cycle of clearing and settlement within one business day, allowing recipients to receive funds earlier than the usual end of the banking day. What this means is greater efficiency for individuals and businesses in managing their cash flows,” Mr Tangonan added.
The BSP said these will help support digital payments initiatives its goal to include at least 70% of adult Filipinos in the formal financial system.