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BSP shifts more to digital technology innovations

Financial inclusion program


By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) said it will be increasing focus on expanding financial inclusion through digital technology and create a digital finance ecosystem for a more inclusive growth.

“(The BSP) is setting its sights on digital innovations as catalyst and strategic enabler for financial inclusion (and) digital technology can significantly reduce transaction costs and expand reach – making it possible and even compelling for banks and other financial institutions to serve the hugely untapped low–income market,” it said in its 2017 year-end report on financial inclusion.

Chuchi G. Fonacier

Chuchi G. Fonacier

The BSP is laying the groundwork for a digital finance ecosystem that will support the “diverse needs of all users in a manner that is secure, sustainable, convenient and affordable.” As for the service providers, this ecosystem will open a bigger market pie through a wider client base, as well as “diversify revenue sources and secure new growth opportunities.”

Based on the report, this ecosystem will be supported by three pillars: an efficient retail payment system that facilitates delivery of digital products, especially for small value transactors; an expansive network of low-cost touch points to onboard new clients and facilitate the digitizing and disbursing of cash and other financial transactions; and democratized access to a transaction account, wherein every person – regardless of economic and social stature – is able to open an account and use digital finance products.

At the end of 2017, in aid of financial inclusion, 163 banks are operating as microfinance banks with 1.71 million clients. In the meantime, e-money accounts which is part of the BSP’s pioneering regulatory environment to grow financial inclusion, now number at 11.4 million.

The BSP reported that 90.1 percent of municipalities have at least one access point and 65.1 percent have bank branches. “Access point per 10,000 adults stood at 9.8. These figures are expected to grow as banks set up more low-cost, low-key access points such as branch-lite units and cash agents,” said the BSP. “Increased accessibility helped in improving usage of financial services, as can be seen in the year-on-year growth in deposits, both in terms of count (5.6 percent) and value (14.2 percent).”

As per the latest data, 31.3 percent of adult Filipinos have a transaction account and 14 percent are registered to have a savings account.

BSP Deputy Governor Chuchi G. Fonacier, attending the FINTQ KasamaKa National Financial Inclusion Network, said financial technology companies or fintechs are natural support for financial inclusion.

“Some fintech solutions are what some refer to as additive – in the sense that they enhance experience and promotes convenience of existing customers,” Fonacier said, addressing the event participants. “While this surely provides value, I strongly believe that for technology to bring positive disruption, it must not only be additive but instead be transformative in reaching new markets and effectively addressing needs, particularly of those who have long been unserved or underserved.”

Fonacier said this would be inclusive fintech where technology “is harnessed to create meaningful financial solutions for low-income people and segments of the market who have been kept outside the financial system for various reasons.”

The e-money platform, she said, is an inclusive fintech example. She noted that since 2000, 48 million e-money accounts have been created.

According to Fonacier, the BSP has a crucial role in “creating the enabling environment for the development of inclusive fintech in the country – and we are taking this role very seriously.”

The National Retail Payment System (NRPS) is one such undertaking that the BSP is currently completing. “The goal is to create a thriving digital finance ecosystem that will transform the Philippines from a cash-heavy to a cash-lite economy. Aside from promoting greater financial inclusion, digitization curbs the negative consequences associated with the high usage of physical cash in the economy,” she said. “Digital solutions also introduce a traceable way of making transactions which can help deter corruption.”

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