Under the strong sponsorship of the BSP, the various industry players – both Banks and non-bank Electronic Money Issuers (EMIs) signed off on Friday, 31 March 2017 on the Charter of the Payment System Management Body (PSMB). Industry players also expressed their commitment to form within 2017 two priority Automated Clearing Houses (ACHs): the Batch Electronic Fund Transfer (EFT) Credit ACH to be called “PESO Net” and the Real Time Low Value Push ACH to be called “InstaPay.”
During the transition period, the Philippine Clearing House Corporation (PCHC) will be designated as the interim clearing switch operator for the PESO Net, and while Bancnet will be named as the interim clearing switch operator for InstaPay, in order to leverage on their existing capabilities and fast track start of operations. After the transition period, the two ACHs will determine best arrangements for their clearing switch service requirements in a manner consistent with NRPS principles.
Industry players are expected to actively participate in one or both of these ACHs. The Batch EFT Credit ACH or PESO Net facilitates fund transfer from one (1) account (payer) to one or several accounts (payee/s). The fund transfer and/or payment instructions are processed in bulk and cleared at batch intervals with each payee receiving the full value in their account. This ACH supports payments that are recurring and are not time critical, thus serving as a channel for government collections and disbursements and an alternative to the overwhelming use of checks by businesses.
Meanwhile, the Real Time Low Value Push or InstaPay ACH facilitates real-time electronic fund transfers by enabling the payer to send instruction/s to his financial institution to irrevocably transfer funds held in his account to the account of a payee, who receives the full value immediately. The service is available 24/7 and credit to account of beneficiary is instant.
The NRPS, through the ACHs, allows the provision of payment options where clients can choose what payment product is most convenient, efficient, and cost effective. By providing the means to perform financial transactions simply and quickly through electronic payments, the NRPS provides the gateway for unbanked, underserved markets to take the first step towards being served by the formal financial system. As consumers gain more purchasing power and experience, opportunities for more financial options could ensue. Financial Institutions can cross-sell their products like deposits and loans, investments and insurance.
These concrete steps are necessary and significant milestones in the implementation of the National Retail Payment System (NRPS). NRPS is the flagship program of the BSP, working together with industry participants, to transform our payment system and to increase retail electronic payments transactions to twenty percent (20%) of total transactions by 2020 from one percent (1%), based on 2013 country diagnostics made by the Better Than Cash Alliance (BTCA) .
NRPS promotes competition in terms of quality, availability, and wide array of electronic payment products and services, innovation that introduces safety, speed, and convenience to encourage usage, creation of new business models adapted to the needs of target markets, and customer pricing that are reasonable and market-based.
NRPS furthermore seeks cooperation among participants. It centers on the payments clearing and settlement process since all have common concern on payment systems’ safety and efficiency. The cooperation of participants is sought to move the consolidation of the governance of various domestic retail payment clearing schemes, existing and to be created, into a single and formalized industry self-governance body, the Payment System Management Body (PSMB). The primary role of the PSMB is the formulation, issuance, and enforcement of governance framework comprising of principles, policies, rules and guidelines on clearing “off us” transactions, including sound risk management, non-discriminatory membership and efficient dispute resolution. Moreover, PSMB governance shall cover all payment clearing processes. No bilateral clearing between participants shall be allowed so as to gain visibility of all clearing results.
The payment industry can certainly leverage on NRPS infrastructures and technology to devise products that are responsive and suited to the needs of consumers, including the excluded markets.
Therefore, NRPS has huge potential to make the financial system stable and efficient, contribute to higher economic growth, and help enhance the overall competitiveness of our economy.