BSP: Cash-light economy to benefit SMEs, unbanked

THE NATIONAL Retail Payment System (NRPS) to be rolled out by the middle of next year would help widen financial inclusion in the country while also generating savings for the economy, a ranking Bangko Sentral ng Pilipinas (BSP) official said.

“Based on the experience of other countries, a shift from paper-based to an electronic-based payment system can generate annual savings of up to 1 percent of the gross domestic product. Countries with high levels of electronic payment transactions per capita also have high levels of per capita income,” BSP Deputy Governor Nestor A. Espenilla Jr. said in a speech last week.

Espenilla pitched the NRPS, a policy and regulatory framework, which he said “aimed to establish a safe, efficient, reliable, and affordable retail payment system in the country.”

“The framework defines high- level policies, standards and governance principles covering retail payment operations and infrastructures. NRPS promotes interoperability in the payment system by enabling businesses, individuals and the government to have an account to receive and store funds, make payments and/or transfer funds to any account maintained in other institutions anytime, anywhere, through the use of any digital device, at reasonable cost and convenience of the customer,” Espenilla said.

According to Espenilla, small and medium enterprises (SMEs) would greatly benefit from the system. “With NRPS facilitating the flow of funds through a variety of use cases, we can be assured that even small players in the economy can benefit. Remittance flows, global trade and e-commerce calls for a robust person-to-person (P2P), business-to-business (B2B), person-to-business (P2B) and business-to-government (B2G) payment flows, which the NRPS can strongly enable and support.”

The NRPS would also prioritize the establishment of an electronic credit transfer scheme, through which both individuals and businesses could open one account with any financial institution and enable them to transfer funds and/or make payments to any other accounts maintained in other financial institutions, Espenilla said. He said transaction costs would be cheaper through the platform.

The Philippines has remained “cash and check-dependent,” he said. Only 1 percent of the 2.5 billion payment transactions in a month, worth around $74 billion, was being done through electronic means, the BSP official said.

Espenilla noted leading banks have been aggressively offering electronic banking services, but “transaction fees were still comparatively high, especially on electronic interbank fund transfers.”

“As a result, intra-bank fund transfers between client companies and their suppliers and/or employees has become the norm. It was not uncommon for businesses to maintain accounts with several banks and do ’on-us’ transactions electronically, or use banks’ checking facilities, rather than incur high charges for doing interbank fund transfer transactions,” he said.

As for automated teller machine (ATM) services, interoperability was limited to card-based ATM withdrawals mainly in urban areas, Espenilla said.

“People living in remote and hard-to-reach areas generally remain unbanked. On the other hand, merchants prefer to receive cash instead of accepting electronic payments due to high merchant discount rate being charged for the use of point-of-sale terminals,” he added.

Espenilla said the BSP was positioning the NRPS “to facilitate the country’s transition from a cash- heavy to cash-light economy while ensuring there was no discrimination in access by all qualified participants to the retail payment system.”

“This would bring material benefits for businesses, consumers and the government—in terms of speed and efficiency of transactions, reduced costs, improved transparency, enhanced security, and expanded access to financial services. The NRPS can serve as an effective platform upon which innovative digital solutions for financial inclusion can be delivered,” the BSP official said.

“The payment industry can leverage on NRPS infrastructures and technology to devise products that are responsive and suited to the needs of consumers, including the excluded markets,” Espenilla said.