Shifting to digital payments will bring economic growth and create a more inclusive Philippines.
This was the rallying call of government officials and private sector leaders in a virtual dialogue Advancing E-Payments via Public-Private Partnership on Wednesday, October 28. The event, hosted by the Makati Business Club (MBC) and the United States Agency for International Development’s (USAID) through its E-PESO Project, convened 13 business organizations to encourage businesses to shift to e-payment modalities.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno discussed the government’s efforts to shift to digital payments. He presented the BSP’s Digital Payments Transformation Roadmap 2020-2023, highlighting (1) strengthening customers’ preference for digital payments, and (2) having more available digital financial products and services as strategic objectives.
The first objective aims to convert 50% of the total volume of retail payments and expand the proportion of Filipinos with access to financial services to 70%. The second objective aims to
have more available innovative digital financial services that will enable the national ID system and the modernization of payment systems.
“The path towards digital transformation is an uphill journey. Each step requires collaborative engagement among stakeholders. Being prominent business leaders, you should spearhead the wider adoption of digital payments in the business community. The road ahead is long and bumpy. But with your unceasing support, I have no doubt that we will be able to sustain the momentum and transform our payments ecosystem into one that is safe, efficient, and reliable,” BSP Governor Benjamin E. Diokno told business leaders.
Since 2012, the Philippine government has committed to increasing the use of digital payments. The country is a founding member of the Better Than Cash Alliance (BTCA), a global partnership of 75 governments, companies, and international organizations that aims to accelerate the transition from cash to digital payments to reduce poverty.
Despite its commitment, the Philippines still has a long way to go in terms of adopting a fully digital economy. BTCA Managing Director Dr. Ruth Goodwin-Groen noted that only 2% of supplier payments are made digitally by formal businesses with most informal businesses relying solely on cash. In the private sector, only 12% of salaries are paid directly to account.
“There is a huge opportunity for our business leaders in the Philippines to digitize their payments. The end goal is to achieve more of the Sustainable Development Goals through an inclusive system that increases transparency, efficiency, and participation,” Goodwin-Groen added.
To help raise awareness in the industry, USAID has partnered with the Makati Business Club (MBC) to undertake an advocacy campaign for businesses to increase the volume and quality of e-payments usage. “The Makati Business Club and the USAID have a common desired outcome of increasing financial inclusivity and e-payments usage to facilitate purchases, and payment of government fees, which is good for consumers, government and businesses as these contribute to boosting the economy and domestic markets, expanding capacity and making the Philippines more innovative and competitive,” said Jenna Diallo, USAID Philippines Deputy Director for Economic Development.
USAID has supported the policy formulation for the National Retail Payment System or NRPS since 2015 and continues to support its implementation and expansion of digital payments infrastructure in the Philippines.
Barriers to e-payments adoption
In a “Study on E-Payments by Businesses” conducted by USAID, they found that businesses experienced barriers to adoption in the areas of regulatory, behavioral, ecosystem environment, financial, and customer experience. These barriers reinforced the practice of manual exchange of documents such as invoices and receipts and issuing supplier payments via checks.
However, when strict levels of community quarantine were put in place to curb the COVID-19 pandemic, these practices were challenged due to mobility restrictions. The past few months also saw the rise of online businesses, e-payments, and funds transfer particularly for retail consumers.
Both government regulators like the BSP and business owners rode on this momentum to generate awareness and usage in digital payments. BSP, for example, ran the award-winning “Stay at Home, Use E-Payments” campaign with USAID’s assistance through its E-PESO Project to encourage businesses and individuals to shift to digital payments. The trends in digital payments during this pandemic shows that shifting to digital payments is one way to future-proof businesses amid the changing payment ecosystem.
The Department of Finance is also actively addressing these barriers with their digitization roadmap, focused on the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) to ease the compliance burdens of businesses. BIR has promoted the e-Filing of tax returns for businesses using e-Filing and Payment System and e-BIR Forms. BOC, on the other hand, is planning to shift to online payments of fees and charges.
“We would like to highlight that the BIR and at the BOC have started moving towards digitalization. We started a few years back even before the pandemic. We finalized a Digital Transformation Roadmap with the aim of guiding BIR to be a “Digitally Transformed Institution, providing convenient, reliable and transparent service to Philippine taxpayers” by 2030. This provides a holistic approach to transformation as it considers people, process, and technology through its major programs,” DOF Undersecretary Antonette Tionko shared.
Undersecretary Tionko also noted that the government is working on implementing the Electronic Invoicing System (EIS) and strengthening the Anti-Money Laundering Act.
Opportunities amid the pandemic
Ayala Corp.Chairman and CEO Jaime Augusto Zobel de Ayala expressed the importance of public and private sector partnerships in pushing the agenda of digitizing payments during the COVID-19 pandemic, where both large and small businesses were affected.
“The pandemic has been difficult for all of us, but what it has done is fundamentally change how consumers behave. It’s given a massive push to this whole digital initiative. To a certain extent we’ve all had to experiment with, and make significant investments in tools to take transactions online,” Zobel de Ayala noted.
In the Ayala Group, for example, Zobel de Ayala shared that they have leveraged e-payments to continue serving clients, continue providing support to employees and other stakeholders using digital platforms, and ensure the continuity of their business operations.
Other private sector representatives expressed their hopes for continued collaboration with various national government agencies and lawmakers to lobby and prioritize key policies to enable a more conducive environment for e-payments in the country.
Meanwhile, MBC hopes to engage more businesses closely to push them to adopt e-payment modalities to pay suppliers and employees, conduct government transactions, and transact with their customers.
“We are in this to help stakeholders with digitalization, financial inclusion, and adapting to the new normal. We look forward to helping get more private sector input and adoption and engaging with the government and other collaborators in a joint push for convenient, safe and secure e-payments,” MBC Executive Director Coco Alcuaz noted.