It has been made clear by the Bangko Sentral ng Pilipinas (BSP) multiple times in the past that the future of the Philippine economy will be digital. The central bank has committed to a target of digitizing at least 50% of all retail payments by 2023, and the country is close to meeting that goal.
In fact, according to Visa’s Consumer Payment Attitudes Study, 84% of Filipinos said they used cashless methods to carry out their transactions last year. Visa Country Manager for the Philippines and Guam Dan Wolbert said that in the Philippines, the preferred cashless channel was the mobile wallet (64%), followed by online card payments (52%), card payments at physical stores (44%), and QR-based payments (31%).
“It’s no longer just a card or an online credential, we’re seeing contactless, we’re seeing QR, we’re seeing other payment methods to become firmly established,” Mr. Wolbert said in a virtual briefing.
BSP Governor Benjamin E. Diokno said in a report about the status of digital payments in the country that he is optimistic that digital payments adoption will sustain the upward momentum during the post-pandemic years and that it is set to reach the 50% target by 2023, as the BSP has laid out regulatory reforms that served as strong foundations and is well positioned to take advantage of fintechs in boosting the adoption of digital payments toward a cash-lite economy.
“In keeping with our commitment to inclusive growth, we shall continue with our goal in providing universal access to safe, affordable and convenient digital payments and financial services to every Filipino,” the governor said.
The central bank is also testing the waters of wholesale central bank digital currencies (CBDC), or virtual currencies for public use. It has recently announced work on a pilot project that will test the use of CBDCs for large-value financial transactions among selected financial institutions.
“The pilot project covers the experimentation of the CBDC’s use to transfer large-value financial transactions on a 24 [hours] by 7 [days] basis, across a limited number of financial institutions but possibly covering both banks and nonbank institutions,” Mr. Diokno said in his speech at the Alliance for Financial Inclusion Policymakers’ Roundtable at the 2022 International Monetary Fund-World Bank Spring Meetings.
The program, dubbed Project CBDCPH, seeks to become the first major step for the country’s financial industry in understanding the opportunities and risks of wholesale CBDCs, he said. The BSP wishes to test CBDCs’ value in addressing pain points such as large cross-border foreign currency transfers done through the national payment system, as well as ease challenges related to intraday liquidity facility.
Project CBDCPH covers areas including policy and regulatory considerations, technological infrastructure, governance and organizational requirements, legal matters, payment and settlement models, reconciliation procedures, and risk management. According to the BSP, external advisers from multilateral institutions and international standard-setting bodies have also been tapped for the project.
“There is minimal value added of the use of retail CBDC in the Philippines in the short term given the progress in our widespread implementation of retail payment digitalization and financial inclusion reforms,” Mr. Diokno said. — Bjorn Biel M. Beltran
