The National Retail Payment System spearheaded by the Bangko Sentral ng Pilipinas will revolutionise payments in the Philippines, bringing the country on a par with its neighbours.
The new National Retail Payment System (NRPS) is a key component of Bangko Sentral ng Pilipinas’ (BSP) initiative to drive greater financial inclusion in the country. It will enable easier and real-time interbank transfers, as well as merge the various ATM, mobile money, and electronic point-of-sale networks.
BSP governor Tetangco said that the NRPS would help boost financial inclusion and “contribute to the stability and efficiency of the financial system and the economy as a whole,” noting that a shift from a paper-based to an electronic-based payment system can create annual savings of up to 1% of gross domestic product. Moreover, he observed that an advanced payment system is part of a holistic financial infrastructure building programme that will attract foreign investments and drive economic growth. Filipinos currently make around 2.5b payment transactions per month worth $74bn, but only 1% were transacted electronically and the rest in cash or cheques.
The NRPS initiative follows similar developments in more developed markets that have put in place real-time retail payments systems. Michael Moon, head of payments markets, SWIFT APAC, cited about 30 “live” programmes and those in various stages of planning around the world. “The National Retail Payment System agenda in the Philippines is really quite timely,” he remarked.
To date there are 18 countries around the world that are already operating real-time interbank payment systems, plus a further 12 countries either planning or building their systems whilst 17 Eurozone countries are exploring the issue.
Countries leading real-time retail payments system innovations in the Asia Pacific region are China, Hong Kong, India, Japan, Singapore, South Korea and Taiwan while countries in the region at the same planning and building stage as the Philippines are Australia, Indonesia and Thailand.
However, the Philippines faces additional challenges as digital banking and payments is not well-established compared to some of its peers in the region. While adoption of ATM cards is high – there are around 78m cardholders as of March 2015 and the volume of switched transactions stood at an average of 1.36m per day in 2014 – doubts about digital real-time payment adoption, which is also part of the NRPS initiative remain.
Offering insight, Ken Arthur Tiambeng, VP, head of electronic banking, Banco de Oro Unibank shared: “Forty percent of Filipinos are online, yet only 13% of bank customers have tried digital banking. Among peer countries, we are laggards.”
The scale of the challenge has been recognised. It was announced earlier this year that the NRPS targeted implementation was 2016. However, this date has recently been changed and may take significant time to realise. Considerations on regulation, security, infrastructure, and adoption are still to be ironed out. There is still much work to do before the system will be up and running and the full benefits of financial inclusion delivered.