Benjamin E Diokno: Monetary digitalization


Women and gents, a pleasing day to all of you.

I thank HSBC for inviting me to talk in your “ASEAN Subsequent-Dialogue on Digital Banks”.

The COVID-19 disaster has introduced monumental challenges for economies worldwide. We on the central financial institution are harnessing the potentials of economic expertise to assist obtain full restoration and notice a stronger post-COVID Philippine financial system. 

Following the 12.0-percent rebound within the second quarter, the financial system grew by 7.1 %, the best amongst ASEAN nations.

The additional de-escalation of alert stage and easing of mobility restrictions nationwide, however particularly within the Nationwide Capital Area, would assist restore jobs within the final quarter of this yr. 

Based mostly on Google mobility, we proceed to see vital progress in mobility versus final yr. 

The financial restoration is being supported by optimistic developments on the financial, exterior and banking fronts. 

Value motion is manageable, offering an enabling atmosphere for pickup in consumption and investments. 

Trying forward, inflation may settle above the two to 4 % goal this yr on account of supply-side pressures however is anticipated to revert to the goal vary in 2022 and 2023.  

Exterior commerce has recovered. From January to September, exports grew by 18 %, whereas imports grew by 30.3 %.

In the meantime, overseas direct investments jumped nearly 40 % within the first eight months of the yr with the majority coming from manufacturing and monetary companies.

Our exterior funds place stays robust. As of October, the gross worldwide reserves stood at US$108 billion. That is equal to nearly 11 months’ price of imports of products and fee of companies and first revenue. 

The standard knowledge is that 3 months’ price of imports is adequate.  

Let’s now transfer on to the Philippine banking sector’s efficiency.

Benefitting from regulatory reforms of the previous twenty years, banks within the nation have constructed resilience to shocks. Whereas the pandemic brought on an increase in soured money owed, asset high quality stays sound. Banks even have ample buffers towards credit score losses. 

For one, Philippine banks have usually noticed prudent lending requirements amid sound regulatory atmosphere. Additionally, the Monetary Establishments Strategic Switch (FIST) Act, permitting banks to dispose unhealthy property to asset administration corporations serves as pre-emptive measure to handle any improve in mortgage defaults.

Banks have ample capability to soak up shocks, with capitalization remaining properly past the  minimal regulatory necessities.  

Banks additionally get pleasure from more-than-enough liquidity. 

In the meantime, financial institution lending has recovered on bettering demand for loans. 

Banks have additionally remained worthwhile all through the disaster. 

All these key indicators attest to the flexibility of the banking sector to assist restoration of the Philippine financial system.

Whereas the highway to full restoration stays iffy, the medium- and long-term prospects for the Philippines are promising. 

Shifting on to BSP’s monetary digitalization agenda – 

The rationale behind the push for monetary digitalization is two-fold. First, is strong financial progress. Know-how accelerates monetary transactions, thereby hastening capital restoration and revenue era. Second is monetary inclusion. Know-how permits the underserved sectors-such as low-income earners and folks from distant areas-to simply entry inexpensive monetary services, together with credit score for livelihood actions. 

The BSP launched final yr the Digital Funds Transformation Roadmap-our blueprint for reworking the Philippines right into a cash-lite society. 

Beneath this roadmap, we intention to attain a shift of not less than 50 % of retail funds to digital transaction; and 70 % of Filipino adults to have a proper monetary account by 2023.  

We’re assured of hitting the dual objectives.

On the primary purpose, when it comes to quantity, the share of digital funds to whole monetary transactions reached 20.1 % in 2020 from 14.0 %  in 2019 and only one.0 % in 2013. Final yr’s goal of 20.0 % appeared unrealistic for a lot of, however we have been capable of obtain it with energetic promotion. The mobility restrictions brought on by the pandemic contributed to the broader adoption of digital funds.    

As extra Filipinos embrace the comfort of digital funds, we anticipate the exceptional progress in digital monetary transactions to proceed within the years forward.

On the second purpose, registered digital cash accounts reached 138.8 million final yr with a complete variety of transactions of 1.7 billion. In the meantime, the variety of primary deposit accounts reached 7 million with PHP4.8 billion deposits within the first quarter of 2021. 

As of the primary quarter of 2021, the proportion of “banked” Filipino adults have reached 53 %, nearing the goal of 70 %. These embody primary deposit and e-money accounts. 

The BSP welcomes the current issuance of the implementing guidelines and laws of Govt Order No. 127, which liberalizes entry to satellite tv for pc companies by permitting non-enfranchised however registered Web Service Suppliers (ISPs) and Worth-Added Service Suppliers (VASPs) to instantly entry satellite tv for pc programs to construct broadband amenities. That is anticipated to enhance the standard and scale back the price of web companies within the nation, which bodes properly for our monetary digitalization and inclusion agenda.

The BSP has achieved milestones in digital banking. Following the issuance final yr of the “Digital Banking Framework”, the BSP has already granted licenses to six entities. 

We anticipate these newly licensed digital banks to carry banking within the Philippines to new heights.

The BSP has launched final month the “QRPh P2M (person-to-merchant),” that may promote in depth use of QR codes, enabling funds to distributors and public transport. 

Different initiatives within the pipeline will make digital payments fee extra handy. The “interoperable payments fee facility” will enable payments fee of consumers to billers even with completely different service suppliers. The “Direct Debit” facility gives prospects the choice to permit computerized debiting of recurring payments funds from their accounts. In the meantime, the “Request to Pay Facility” permits payees to electronically ship a “request to pay” in order that payors could conveniently do funds by merely responding to the request. 

Moreover, as a part of our monetary digitalization drive, the BSP is working with  the  Division of Labor and Employment  to advertise digitalization of wage funds, and with the Division of Transportation  to develop using digital platforms to pay for transport fares. 

The BSP likewise helps the Philippine Identification System, which can enable unbanked Filipinos to lastly open monetary accounts, thereby speed up monetary inclusion.

Trying past the nation’s borders,  the BSP and the Financial Authority of Singapore lately signed an enhanced FinTech Cooperation Settlement to facilitate interoperable funds between the Philippines and Singapore.  The BSP intends to pursue related preparations with different financial authorities within the ASEAN area. 

Furthermore, the BSP can also be learning the Financial institution for Worldwide Settlement (BIS) Innovation Hub’s Venture Nexus. “Nexus” is a mannequin for connecting a number of on the spot fee programs right into a single cross-border platform. Whereas this mission shouldn’t be but operational, the BSP is utilizing its blueprint as a information in designing cross-border preparations to assist bilateral and multilateral platforms sooner or later.

Lastly, the BSP is supporting legislative reforms that complement the monetary digitalization agenda. 

One is the Monetary Shopper Safety invoice, which can strengthen the BSP’s skill to handle client issues on digital monetary accounts and improve client security and belief on the digital monetary system. 

Additionally, the Open Entry in Information Transmission invoice, which seeks to decrease the boundaries and price of entry within the knowledge transmission business to draw extra gamers. 

This proposed laws is anticipated to considerably enhance the standard of web companies, serving to our digitalization efforts flourish.

With monetary digitalization I’m assured that we are going to obtain the stronger post-covid financial system that we envision sooner relatively than later. 

Thanks very a lot to your consideration.  


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