With the onslaught of Bitcoin and online shopping, banking and financial institutions are forced to keep up as the consumers’ habits rapidly change with the times.
Bangko Sentral ng Pilipinas (BSP) is not turning a blind eye on these realities, in fact, they aspire that 20% of payments in the country will be done digitally by 2020.
“A World Bank study actually showed that economies with great volume of electronic payments tend to have higher level of per capita income,” BSP Core Information Technology Specialist Group Bank Officer V Anna Racines said in her talk at the 8th BankTech Asia on Tuesday, May 24.
But the road to digital adaption will not be smooth ride, as a study of Better than Cash Alliance in 2015 revealed that out of all payment transactions done in the Philippines, only 1% are considered digital.
National Retail Payment System
So BSP proposed the National Retail Payment System (NRPS) framework to the industry that will, hopefully, convene financial institutions, banks, and other government agencies to embrace the digital solutions available and craft innovations for better services to the public.
“The NRPS framework are high-level principles that would be followed by the financial institutions who wish to participate. This would hopefully enable interoperability between them with the assurance of safety and affordability for consumers,” Racines said.
Under the initiative, the electronic credit transfer scheme may be possible, which will enable any individual or business with an account in any financial institution to transfer funds and/or make payments to any other account within the framework.
Once it pushes through, the retail payment system will hopefully clear consumers’ initial hesitation to keep their money in digital form for security purposes or impending inconvenience as its use is still limited.
BSP has been conducting studies since 2013 but only laid out the framework in December last year. Racines is positive the initiative will move forward even with the changing administration as President-elect Rodrigo Duterte also echoes what the central bank aspires for: a transparent and better banking service.
“I think President-elect Duterte will be supportive of this plan because he has previously stated he aims for transparency and what we’re doing are in accordance to his policies,” Racines told Entrepreneur.com.ph on the sidelines of the event.
The passing into law of the formation of the Department of Information and Communications Technology is also good news for the central bank as this meant better government support of their initiatives.
Related: Department of ICT law signed
Racines said they are still in talks with other government agencies like the Commission on Audit (COA) and Department of Finance (DOF) as they review on the present regulations and policies that could be impeding the NRPS to push through.
“Although we already have the e-commerce law, there are still some policies that need to be reviewed. Like the COA mandates a physical receipt for some transactions,” Racines said.
Emerging Filipino fintech
For the private sector, this has long been part of their plan even before the government took notice.
In the first quarter report of PLDT Inc., the company highlighted their financial technologies’ triumphs, albeit small in scale today, and emphasized how the sector could be one of its revenue drivers in the future as part of their 3-year digitalization.
“Unlike what most believe, FinTech is an enabler not a disruptor for financial institutions. It will provide the gap for institutions to become competitive,” FIN:TQ President and CEO Lito Villanueva said in his talk at the 8th BankTech Asia.
FinTech or financial technology is an economic industry composed of companies that use technology to make financial services more efficient.
Contrary to the public notion that FinTech is exclusive to millennials, Villanueva said a study showed 45% who use the technology are from Gen X. In fact, one of the emerging businesses in the sector is digital lending, which can still reach new markets especially in far flung, rural areas.
“In the Philippines, 21% of those who applied [for loans] came from third to sixth class municipalities or areas without brick and mortar banks. So banks, instead of building new branches, can actually just build better digital platforms to reach customers,” Villanueva added.
The FIN:TQ executive said by 2017, smartphones will be the primary channel of banking, as most transactions would be done in a click.
“We have to make sure the solutions we will push to consumers are systemic, catalytic, transformational, and trailblazing for banks to stay relevant,” Villanueva said.
Elyssa Christine Lopez is entrepreneur.com.ph's editorial assistant/writer. Follow her on Twitter @elyssalopz.
Cover photo from Coins.ph