EMBRACING digital payments will benefit consumers, businesses and the government as this will help ease operating costs and improve processes, according to the central bank’s new deputy governor tasked to focus on the regulator’s goal to turn the country into a cash-lite society by 2023.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Mamerto E. Tangonan said in a Fireside Chat session at the BusinessWorld Virtual Economic Forum on Wednesday that the central bank’s goal to digitize payments could increase economic activity while also generating savings.
“In terms of market inclusion and expansion, digital payments can empower new business models that can drive more spending and expansion of the economy,” Mr. Tangonan said.
The central bank wants digital payments to make up 50% of total transactions in the country, both in terms of volume and value, by 2023. Mr. Tangonan said this shift will mean savings for both payers and payees.
He noted that digital payments could also be advantageous for the government as it can improve its processes, such as when giving subsidies and aid.
“Fully digitalizing ayuda (aid) could save the government $100 million annually. That’s about P5 billion. If you turn away from paper-based modes, that could yield you around 1% of GDP (gross domestic product),” Mr. Tangonan said.
Going digital also means firms will also have enhanced risk management, Mr. Tangonan said, as this allows for an “electronic audit trail of all the movements from the source to destination accounts”.
The central bank official said the national ID program will help improve access to digital payments and financial services in general.
Those in the informal economy will have access to financial institutions’ products such as credit, microinvestment and insurance, he said, once these entrepreneurs have a national ID which can be accepted by banks for account openings.
Only 29% of Filipino adults had accounts with formal financial institutions in 2019, leaving about 70% or 51.2 million unbanked, based on a BSP survey.
The BSP wants to bring the country’s banked population to 70% of Filipino adults by 2023.
Key players in the shift to digital payments include banks and fintechs, with the latter likely to go into partnerships with big banks to bring more Filipinos into the formal financial system.
“Fintechs are very good with user experience, design. They can make the experience with more quality and convenience,” Mr. Tangonan said. — L.W.T. Noble