In partnership with the United Nations Capital Development Fund’s Better Than Cash Alliance, the central bank of the Philippines is using data to unearth systemic barriers to digitalisation and accelerate the country’s digital economy.
In 2013, a mere 1 per cent of payments in the Philippines’ payments were digital, according to a study conducted by the nation’s central bank, Bangko Sentral ng Pilipinas (BSP).
Fast forward to 2021, the share of digital payments increased to a whopping 30.3 per cent, far exceeding BSP’s initial target of 20 per cent digital payments by volume – and it did all this while onboarding a higher proportion of women users than men.
The Philippines is one of the founding members of the United Nations Capital Development Fund’s Better Than Cash Alliance, which brings together governments, companies, and international organisations to accelerate a digital economy by making digital payments as inclusive and easy as possible.
“The Better Than Cash Alliance celebrates the Government of the Philippines’ and BSP’s leadership of this remarkable responsible payment digitalisation journey. It is with great pleasure that we share the key lessons and good practices from this ten-year data-driven success story.” said Dr Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance in a recent press release.
BSP’s research showed that the Southeast Asian state faced unique challenges such as a largely unbanked population and the informal nature of Filipino businesses in its journey to digitalisation.
According to a new case study report released by the Better Than Cash Alliance, the project was able to overcome these challenges due to three factors:
- Institutionalising data systems and investing in capacity
- Constant evaluation of progress against transparent targets
- Proactive policymaking to satisfy evolving needs
GovInsider recaps some highlights of BSP’s efforts to digitalise payments in the Philippines.
Institutionalising data systems
Prior to the 2013 study, there was reportedly little data available to track digital payment adoption and usage rates.
Recognising this, BSP embarked on a three-year long preliminary study to revamp the country’s approach to collecting and managing financial transaction data.
“Continuous measurement of progress requires the aggregation of differentiated data streams,” the report detailed. This meant that BSP had to track payment data across multiple sources, such as credit card transactions, merchant e-money transactions, and the national financial inclusion survey.
Data external to BSP’s own database was also crucial to gaining a full picture of the Philippines’ digital economy – but collecting such data would often delay monitoring and require more manpower.
In response, BSP launched a data collection framework in 2020 – the Electronic Payments and Financial Services Monthly Report – mandating BSP-supervised financial institutions to provide more frequent and comprehensive data on retail transactions in the Philippines.
To incentivise these financial institutions to update their datasets promptly, the bank will also be releasing a “lite” version of this framework in the near future, the report states.
A bespoke policy simulator
As regulators seek to digitalise payments, they encounter challenges in measuring projected impact before investing resources into their chosen policies. To properly measure projected impact, BSP partnered with the Better Than Cash Alliance and Dalberg to develop a policy simulator.
The simulator could determine the policies that would create the most impact and identify the conditions that would allow these policies to thrive. These could include the channels through which a policy would be executed, or the time required for the policy to manifest results.
Ultimately, the simulator identified two out of six shortlisted initiatives that would contribute to a spike in adoption of digital payments in the Philippines.
First, the multiple batch settlement initiative was launched in January 2022 on BSP’s electronic funds transfer system, PESONet. The initiative increased PESONet’s daily processing of funds transfers from one to two cycles daily, enabling users to receive funds at an earlier time of the day, instead of having to wait till the end of the day.
This greatly enhanced user experience for individuals, helped businesses have shorter clearing intervals and better manage their cash flow, and saw an overall increase from 5.5 million to 7 million transactions from 2020 to 2021 on PESONet.
Second, the Bills Pay PH policy was launched in December 2022, which facilitates digital transactions across accounts from different payment service providers. This policy smoothened interoperability and saved users the trouble of having to physically line up at business centres to pay their bills in cash.
Minding the invisible gap
The Philippines is one of the few countries where women outperform men across a range of financial inclusion indicators. In the 2022 Global Gender Gap Report, the country ranked first in gender equality in Asia, and 19th of 146 countries worldwide. The 2015 World Bank Financial Capability Survey also suggested that Filipino women are four per cent more likely to have higher financial literacy than men.
Despite the above mentioned advancements in data collection, the report disclaims that gender-disaggregated data can only be partially tracked. “While all available lead indicators (account ownership, credit access, etc.), suggest that a gap is unlikely to exist, the extent of the actual gender gap in digital payments remains unknown,” it states.
Nevertheless, only one in three women in the Philippines are currently financially included, and even fewer women participate in digital transactions.
While data on women's usage levels, such as wage payments, government-to-person transfers, and online purchases, may currently be challenging to track, BSP endeavors to monitor available data to address the gender gap. This includes tracking utility payments, e-commerce activities, and remittances.
“Our strong commitment to accelerating responsible payment digitalisation over the last decade has helped broaden financial inclusion and participation in an increasingly digital economy for millions of Filipinos, including women. We hope the lessons from our experience in the Philippines can also offer useful insights for other countries on a similar journey,” said Dr Felipe Medalla, Governor of BSP.
Click here to read the full report by Better Than Cash Alliance.
