BSP’s welcome edict on electronic payments

September 15, 2018

THE news may not have reached many people since the collective focus of the nation is still on the disturbing issues of inflation, Sen. Antonio Trillanes 4th and now Ompong, but the Bangko Sentral ng Pilipinas (BSP) has taken a decisive step toward providing Filipinos with a more accessible and responsive banking system.

In a memorandum issued last week, the central bank directed BSP-supervised financial institutions to make their fund transfer services that are done via their Philippine EFT System and Operations Network (PESONet) and InstaPay services available on their internet and mobile application platforms by November 30 of this year.

BSP Deputy Governor Chuchi Fonacier said the directive was in line with Circular 980, or the adoption of the National Retail Payments System (NRPS) Framework, which was issued in November of last year.

The NRPS is a comprehensive program to modernize and boost the capacity of the Philippines’ payments and clearing systems by encouraging the use of automation and e-payment applications. The goal of the NRPS is to increase electronic transactions to at least 20 percent of all financial transactions in the Philippines by 2020, from a paltry 1 percent in 2013.

So far, 22 banks or other financial institutions have initiated fund transfers via PESONet for their customers, while nine banks are also offering InstaPay, according to Philippine Payments Management Inc. (PPMI), the payment system management body created by the NRPS Framework.

The main difference between the two systems, at least from a customer perspective, is that PESONet transactions are made free of charge, but take longer to complete — the funds are made available to the recipient at the end of the business day, or the start of the following business day — while InstaPay transactions are virtually instantaneous but carry a small fee.

Under the NRPS guidelines, banks or financial institutions can only charge fees, if any, to the sender of funds, with the receiver collecting the full amount sent.

The benefits of the system are speed and cost savings. With much of the transfer process automated, handling is reduced, which saves both time and money. Quicker money transfers at a much lower cost help to encourage more customers to use the facilities. This, along with banking systems and products that open access to customers through online channels without necessarily requiring transactions in person at a physical branch location, helps to increase the number of Filipinos with bank accounts and contributes to greater financial literacy.

While Philippine banks have been on the whole supportive of the NRPS initiatives and are being driven to implement the NRPS Framework by competitive pressures if nothing else, the banking industry has always been characterized by a great deal of inertia.

Successful banks that have been profitably operated for long periods of time using traditional methods and legacy systems are slow to change when there is no business imperative for doing so; this is true of banks anywhere, and perhaps even more so in the Philippines where the banking landscape has been dominated by a relatively small number of big players for decades. The banks would certainly comply with any directive of the central bank, but as a rule, they prefer to do so no faster than they absolutely must, spreading out the costs of making changes over as long a period as they can. That is simply the nature of the banking business.

In that sense, the BSP’s latest directive mandating the rapid implementation of the electronic payment system offerings by those banks capable of doing so is a positive move. It is a needed goad to action by the banks on an initiative that will have sweeping benefits for Filipino consumers and the banking system.