Ensuring a safe, efficient, and reliable payments and settlements system

AN EFFICIENT, secure, and reliable payment system reduces the cost of exchanging goods and services. It is also an essential tool for effective implementation of monetary policy, and for smooth functioning of money and capital markets.

The Bangko Sentral ng Pilipinas (BSP) leads in promoting an efficient payments and settlements system by providing the necessary infrastructure through the operations of the Philippine Payment and Settlement System (PhilPaSS); and the policy and regulatory framework, also known as the National Retail Payment System (NRPS), to establish a safe, efficient, and reliable retail payment system in the country.

PHILPASS AND PHILPASSPLUS

In 2019, the BSP focused on advancing the robustness and interoperability of the PhilPaSS and began to develop the PhilPaSSPLUS. The new system, which was launched on 26 July 2021, can accommodate a growing number of settlements between financial institutions; has rigid controls to support transaction security in fund transfers; and has enhanced system availability.

With broader access channels, PhilPaSSPLUS enables integration with other payment systems locally and abroad and allows for transparent, low-cost, and quick exchange of richer payment information for business and regulatory purposes. It facilitates real-time processing of financial transactions.

As the country recovers from the pandemic, the value of PhilPaSSPLUS transactions surged by 104.2 percent to ₱42.43 trillion in February 2022 from the same period in 2019. Transaction volumes rose 15.1 percent to 96,000 over the same period.

The PhilPaSSPLUS is designated as a” systemically important payment system” (SIPS). A SIPS is a payment system that poses or has the potential to pose systemic risk.

As such, Philippine Peso Real-Time Gross Settlement (PhP-RTGS) participants shall ensure the safety, efficiency, and reliability of the payment system by adhering to the relevant regulations prescribed by the BSP for SIPS, such as the adoption of Principles for Financial Market Infrastructures (PFMI). The BSP shall continue to evaluate and identify payment systems that shall be designated as SIPS and “prominently important payment systems” (PIPS) for oversight strategies that are commensurate to their business activities, systemic importance, and risk profiles. Designated payment systems, such as SIPS and PIPS, shall be subject to closer BSP oversight and to relatively more comprehensive risk management standards and governance arrangements, compared with their nondesignated counterparts.

ISO 20022

In 2019, BSP’s Monetary Board approved the mandating of the adoption of the ISO 20022 as the messaging and communication standard to be implemented by all banks, non-bank financial institutions, and third-party service providers that transmit electronic payment instructions to PhilPaSS. The ISO 20022 standardizes financial messages for all initiatives with different counterparties, business domains, and networks, thereby facilitating the interoperability of payment and settlement systems and other financial initiatives, allowing for straight-throughprocessing of payments.

Aside from allowing transmission of useful transaction details along with payments, the adoption of ISO 20022 enhances the interoperability of the country’s RTGS with the payment systems both onshore and offshore. Interoperability is key to achieving payment system efficiency, which is vital in keeping pace with the growing demand for faster payment services in the interbank market and in the retail space.

NATIONAL RETAIL PAYMENT SYSTEM

The emergence of innovative payment technology is revolutionizing the payments and settlements system. Promoting payments digitalization while maintaining the safety and efficiency of the national payment system is at the forefront of the BSP’s policy agenda as the country transitions into a cash-lite society. As such, the BSP launched a three-year Digital Payments Transformation Roadmap (2020-2023) that charts its current initiatives and strategy toward an efficient, inclusive, safe, and secure digital payments ecosystem.

The digital transformation of the national payment system is crucial in broadening financial inclusion. It enables households, businesses, and the government to conduct financial transactions amid the social mobility restrictions and health protocols against the COVID-19 pandemic.

The COVID-19 pandemic became an essential catalyst for greater digital payments adoption. The BSP’s pre-pandemic initiatives to lay the groundwork for interoperable payment systems proved critical in expanding digital payments adoption during the COVID-19 health crisis. The NRPS capitalizes on the benefits of digital payments to support the country’s economic competitiveness and inclusive growth. It has paved the way for the creation of two automated clearing houses—the Philippine Electronic Fund Transfer System and Operations Network (PESONet) and InstaPay, which allow interoperable fund transfers among accounts from different participating bank and non-bank financial institutions.

Since the pandemic started, there has been a sustained rise in the adoption of digital payments in the Philippines. The latest e-payments measurement report showed that as of end-2021, the share of monthly digital payments volume rose to 30.3 percent from 20.1 percent in 2020. The value of digital payments in the country represents 44.1 percent of total retail payments in 2021—close to the BSP’s target of converting at least 50 percent of retail payments to digital form by the end of 2023.

PESONET AND INSTAPAY

Combined transactions using PESONet and InstaPay—the two interoperable platforms for electronic fund transfers—rose by 44 percent in terms of volume and 46 percent in terms of value as of end-December 2021 compared with2020.

Volume and value of transactions using InstaPay—the platform of smallvalue transactions worth ₱50,000 and below—surpassed ATM withdrawals for the period January-December 2021. Volume and value of transactions using PESONet—the platform for bigger-value transactions—may approach check volume over time if it will maintain its steady increase.