A superhighway for e-payments
Electronic financial transactions are now an indispensable part of our daily lives. If there would be a power and internet outage today, it would definitely be a tremendous challenge for people to live their lives without electronic payment systems.
While there are still numerous financial transactions made using cash and coinage, such as paying for your jeepney fare, purchasing items at the convenience store, or buying street food, there are now several financial transactions that are exclusively accomplished electronically. From withdrawing our salaries from the ATM, paying our bills to purchasing items in online stores, electronic financial transactions (or e-payments) have now gained wider acceptance in recent decades.
LAYING THE GROUNDWORK
At the forefront of facilitation and securing electronic financial transactions within our banking system is BancNet. As the premier electronic payments network in the Philippines, it enables customers of its member-banks to conduct several electronic financial transactions through ATMs, point-of-sale (POS) terminals, the internet and through mobile devices. As such, it is also involved in the introduction of several technological advancements in electronic payment in the country.
Established on July 17, 1990 as an ATM consortium of eight banks — PCI Bank, CityTrust, Security Bank, China Bank, RCBC, Allied Bank, Metrobank, and InterBank. The consortium was responsible for introducing several electronic payment innovations in the country, including the point-of-sale (POS) system (1994), online banking and online payment (2002), automated fund transfer (2002), and mobile phone banking (2006). These innovations basically laid down the foundations to BancNet becoming a superhighway of e-payments today.
Since its inception, BancNet has grown its network to more than 100 member banks and cooperatives, five independent ATM deployers, four electronic money issuers (EMIs) and one affiliate switch network. As of this year, it operates 20,153 ATMs and controls a network of 251,870 POS terminals nationwide.
INTRODUCING INSTAPAY
This year, BancNet laid the last brick in the foundations of its e-payments superhighway with the launch of InstaPay in April. The consortium has been selected by the Bangko Sentral ng Pilipinas (BSP) as the official clearing switch operator for the e-payment service, which is part of the BSP’s National Retail Payment System that would enable at least 20 percent of local financial transactions to become electronic by 2020.
InstaPay enables anyone with a computer or mobile device to transfer funds from the bank or electronic money issuer (EMI) to another without the need to visit a branch and go through long clearing processes. Transaction verification is done instantly and securely anywhere in the country at any time. Senders are simply charged with an inexpensive sending fee, while recipients of fund transfers get their money in full.
So far, 28 banks and EMIs have participated as automated clearing houses
(ACHs) for InstaPay. BancNet expects more member banks to participate in the ACH by 2019.
EXPANDING REACH
While BancNet has pioneered a number of e-payment systems in recent years, ATMs are still their clienteles’ most preferred e-payment system, especially for withdrawing funds, paying bills and money transfers. Records supplied to BancNet by its member banks show that the users of ATM and debit cards increased from 59.81 million in 2016 to 71.99 million last year. As such, the company sought to further expand its ATM network to reach even more people across the nation.
As previously mentioned, BancNet interconnected 20,153 ATMs as of 2017, up 1.30 percent from 19,894 units the previous year. The average ATM availability rate was at 98.04 percent. With the BSP mandating banks to migrate to the EMV (EuroPay, Mastercard, and Visa) standard in 2016, a total of 17,359 or 86.77 percent have already been certified as EMVcompliant as of December 31, 2017. The remaining ATMs are expected to have received their compliance certificates by the mandated deadline of June 30, 2018.
SPREADING CONVENIENCE
BancNet has also contributed to even greater convenience in e-payments by pioneering the POS payment system in the country in 1994. It enabled cardholders to make cashless purchases using only their ATM, credit or debit card. Since then, the company’s POS network has grown and as previously mentioned, BancNet now links 251,870 POS terminals nationwide — an increase of 78.04 percent from the previous year’s 141,465 terminals.
With this increase, it’s only logical for POS transactions to increase as well. In 2017, the number of purchase transactions rose to 42.80 million, up 10.57 million, or 32.80 percent. These transactions had a total value of P140.64 billion, higher by P27.91 billion, or 24.76 percent from the previous year.
Aside from purchase transactions, BancNet has also introduced a feature that allows cardholders to withdraw cash using the POS terminals of partner merchants. Called POS Cash Out, these machines are located in 244 partner establishments — 22 of which joined in 2017 — in areas where there are no ATMs. In 2017, BancNet already has a total of 397 POS machines — an increase of 105 machines or 35.95 percent from the previous year.
Likewise, the number of banks issuing POS Cash Out increased from 43 in 2016 to 49 last year. These banks handled 592,043 transactions, or 282,906 (91.51 percent) more and are valued at P2.79 billion in total — more than double than the previous year’s value of P1.38 billion.
WIDENING HORIZONS
BancNet’s e-payment superhighway has reached not just the physical world but also the virtual, thanks to the advent of the internet. As internet accessibility and usage in the country grew significantly in recent years, BancNet launched its website www.bancnetonline.com to enable clients of its member banks to make online payments for things like bills, purchases, and services.
With the increasing sophistication in cybersecurity threats, BancNet saw the need for enhanced cybersecurity measures in the website to protect its customers and bank partners.
As such, BancNet Online implemented a two-factor authentication (2FA) system alongside the existing ATM PIN feature for every transaction. This assures cardholders that even if thieves stole their card data, their account won’t be accessible to the thieves if they don’t have the unique numerical code sent to the cardholder’s mobile device. A transition version was run on January 24, 2017 to enable the registration of participating banks’ cardholders. The final version was launched on July 19, 2017.
Aside from 2FA, other security enhancements that BancNet implemented include the Intrusion Prevention System; compliance with the Payment Card Industry Data Security Standard (PCI DSS) version 3.2; the migration of member banks’ ATMs to the EMV standard; and regular vulnerability assessment and penetration testing.
REAPING THE BENEFITS
Having achieved numerous feats in the past year as an e-payments superhighway, BancNet has logged stellar numbers that serve as testament to its solid performance.
In 2017, the company processed over 630.50 million switched transactions of nearly 72 million debit cards — an increase of 40.96 million or 6.95 percent than the 2016 volume. As such, the average switch availability rate stood at a high 99.84 percent despite the huge transaction volumes. On the average, BancNet processed 1.72 million switched transactions daily but volume surged to a record-breaking 4.23 million transactions on December 15, 2017, the payday nearest to Christmas.
Because of the staggering increase in transaction volume, BancNet achieved gross revenues of P386.32 million. However, this was lower than the previous year’s gross revenue of P569.41 million gross due to an adjustment in BancNet’s switching fees in favor of network participants. The adjustment is in line with the company’s transition from a profit-centric company to an industry utility.
Lower gross revenues were complemented by lower operating expenses, which dropped to P300.68 million from P332.73 in 2016 primarily because of lower switch hosting and communications expenses. As such, the company posted a net income of P80.25 million, 58-percent lower from the previous year’s P189.92 million. This brought earnings per share to P42.39 and return on equity to 7.78 percent.
While profit numbers were lower than expected, nevertheless, BancNet remains a healthy and profitable company with total assets of P1.19 billion and total equity of P1.01 billion at yearend.
Putting aside profit numbers, what truly stands out in BancNet’s 28 years as an interbank network is how it drastically changed the landscape of financial transactions in the country. Not only did it make e-payments fast, convenient and secure, its constant innovation and evolution enabled ordinary Filipinos in each nook and cranny of this archipelago to make electronic financial transactions effortlessly.
Through BancNet, the country’s vision of a financial industry that is inclusive and accessible to all has become a reality. It is a superhighway that will lead the country to achieving its aspiration of economic growth, development and prosperity for all.