By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES achieved its target of digitizing 50% of all retail payments at 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 showed that the share of online payments in the total volume of monthly retail transactions rose 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 the volume of retail payments by end-2023.
“In 2013, if you recall, only 1% out of the 2.62 billion monthly retail payments was electronic. Ten years after, we are now more than halfway there,” BSP Deputy Governor Mamerto E. Tangonan said at a briefing.
Last year, the volume of digital payments stood at 2.62 billion, slightly higher than the 2.35 billion non-digital transactions.
“Out of 5 billion monthly transactions more than 2.6 billion transactions were successfully converted into digital form representing a substantial 28.1% increase from the previous year,” the BSP said in its report.
Meanwhile, the value of digital payments amounted to $110.5 billion in 2023, higher than the $89.3 billion non-digital transactions.
“In terms of value, the latest e-payments measurement also showed that the share of monthly digital payments to total transactions increased to 55.3% in 2023 from 40.1% in 2022,” the central bank said.
The top contributors to the rise in digital payments were merchant payments, which accounted for the bulk or 64.9% of monthly digital payments 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-to-business supplier payments at (6.1% share or 160 million transactions).
“Philippine digital payments volume is predominantly driven by high-frequency, low-value retail transactions such as merchant payments and person-to-person transfers,” Mr. Tangonan said.
“The growth is underpinned by the growth in QR PH person-to-merchant payments, which increased by almost three times compared to 2022,” he added.
Mr. Tangonan also attributed the rise in account-to-account transfers due to the efficiency and convenience of e-payment facilities PESONet and InstaPay.
“Another significant contributor which is slowly but surely catching up in digitalization is supplier payments. It grew substantially in 2023 at more than twice that of 2022. An observation that underscores the growing adoption and reliance on digital transactions in the business payment landscape,” he added.
The BSP is targeting to achieve a 60-70% share of digital payments over total retail payments volume by 2028, in line with the Philippine Development Plan.
“As you know, in any innovation life cycle, where we are right now, we’re over 50%. The next 20% would equally be challenging, if not more challenging than the first 50%,” Mr. Tangonan said.
He said that the BSP is working on ways to expand the user base of digital payments by reducing costs and increasing the trust of consumers in online platforms.
REQUEST TO PAY
“We have launched several initiatives and many more are underway in the advancement of digital payments and the promotion of financial inclusivity towards our end-goal of a cashlite society,” Mr. Tangonan said.
For example, the central bank is looking at launching new facilities to further boost digital payments.
“We’re continuously digitalizing person-to-person and person-to-business payments, and we’re working with the Philippine Payments Management, Inc. (PPMI) on having the request to pay (RTP) facility made interoperable,” BSP Payments Policy and Development Department Director Bridget Rose M. Mesina-Romero said.
The facility allows businesses and consumers to better control outgoing payments and enhanced monitoring of their cash flow.
“RTP is a payment overlay service that provides 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 either approve the request, and therefore authorize the payment to be made from their account, or decline the request, using the dialogue chain to explain the reason for said action.”
In December 2023, the BSP soft-launched the first use case for the facility, the InstaPay RTP cash-in service. It is targeted to be fully implemented within the 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 digital platform of the receiving financial institution.”
The BSP is also working to implement the RTP facility for e-commerce platforms.
“As you know, e-commerce is growing very rapidly and so we would like to take advantage of that growth by making sure that there’s convenient digital payments,” Mr. Tangonan said.
Ms. Mesina-Romero added that this initiative would also lessen the need for cash-on-delivery transactions for e-commerce purchases.
Apart from 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 rentals, loan amortizations and insurance premiums by simply authorizing billers to pull funds from the account of the payors,” the BSP said.
The facility will also help “streamline collection efforts and improve liquidity management” for payees.
“You would not have to maintain multiple accounts to be able to settle your different obligations to the different financial institutions,” Ms. Mesina-Romero added.
The BSP targets to launch the pilot for the direct debit facility this year.
TRANSIT PAYMENTS
Mr. Tangonan said the central bank is also currently working with the Transportation department to explore alternatives for transit payments.
“As you know, many of our Filipinos use public transportation and that is a very good opportunity for them to enjoy the benefits of digital payments by just using their phones to make the fare payment,” he said.
Apart from this, the central bank is also pursuing other measures to boost digitalization, such as its involvement in Project Nexus.
In March 2023, the BSP and four other central banks in the region announced they will connect their domestic instant payment systems through the Bank for International Settlements’ Project Nexus.
“While it has its origins in the ASEAN (Association of Southeast Asian Nations) region, the vision for Nexus is actually global. And we aim the platform to interconnect with other countries or other regional platforms, also in the Middle East, Europe, and North America,” Mr. Tangonan said.
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 a business day, allowing recipients to receive funds at an earlier time than the usual end of banking day. What this means is heightened efficiency for individuals and businesses in managing their cash flows,” Mr. Tangonan added.
The BSP said that these initiatives for digital payments will help support its target of onboarding at least 70% of adult Filipinos into the formal financial system.