Home / My Thoughts on Payments, Blockchain and new Technologies in the Philippines and other Emerging Markets

The following article appeared in the Zooz Industry Influencer and Q&A blog.

imagesCould you tell us a bit about the current state of payments in the Philippines? The Philippines is undergoing a tremendous change in terms of the payments space with new developments in the banking industry, fintech players entering the marketplace, a growing number of payment service providers, e-commerce marketplaces and a lot of interest among both the private and public sector to support a growing shift to electronic payments.

Why is the Central Bank Chief calling on bankers to help create a National Retail Payment System?
The Central Bank [Bangko Sentral ng Pilipinas (BSP)] is now calling on the banking sector as well as other regulated financial industry players to support the creation of a National Retail Payment System (NRPS). The NRPS is envisioned to help Filipinos have greater access to financial services primarily through electronic accounts to make payments, receive or transfer funds to other accounts anytime, anywhere and at a reasonable price from any digital device. As the BSP Governor recently pointed out, “Efficient retail payments contribute to the stability and efficiency of the financial system and the economy as a whole. Studies have shown that shifting from paper-based to electronic-based payment system can generate an annual savings up to 1% of gross domestic product (GDP).” As has been noted in the recent study by the Better Than Cash Alliance (BTCA), Filipinos make over 2.5 billion transactions a month worth over $74 billion but only 1% are done electronically with the other 99% made via cash or check. This fact, along with the ability to connect to almost all Filipinos digitally via a mobile device, allows for a tremendous opportunity for the payments industry to make a real difference not only from the standpoint of overall economic growth but it also serves as an excellent business opportunity. As the Governor summed up during the recent 25th anniversary of BancNet, “The NRPS initiative is a rare opportunity for all of us to work together to do something that can be a real positive game changer for the economy and for our people.”

What role (if any) is bitcoin playing in the emerging market regions that you follow?
Bitcoin and other virtual currencies are often talked about but transaction volumes are still quite small. Globally, there are only around 100,000 bitcoin transactions a day. If we compare mobile e-money in countries like Tanzania, we see that the number of transactions per day is now over 3 million. Central banks have taken a cautious approach to virtual currencies which is best summed up by the BSP warning issued last year, which cautioned the public about using virtual currencies. The recent move by the New York Department of Financial Services to license virtual currencies is most likely a trend that will be continued in other jurisdictions. Apart from virtual currencies, I think the more interesting development is the use of blockchain technology which potentially offers tremendous opportunities to support the development of payments. Banks and various regulators around the world are now starting to look into this technology to better enable a variety of financial transactions.

Which emerging markets do you see as being most receptive to mobile payments – and why?
Africa, especially East Africa, is still the leader in mobile payments primarily due to the lack of reasonable alternatives and the rapid expansion of agent networks that have provided enough touch points to make it even easier to cash-in or cash-out of accounts, and, more importantly, sufficient value added use cases.

Are there any new companies or technologies that you see transforming the payments space over the next six months to a year?
I previously wrote about the 8 trends that will impact both digital payments and financial inclusion earlier this year. While we are seeing several new players enter the marketplace in many countries and regions, I do think the changes to policies on national retail payments now taking place in several markets including the Philippines and active support from both the governments and private sector to shift to e-payments in several key markets will be the main drivers that will take advantage of the convergence of financial players including traditional banks, new payment service providers, and new technologies that will transform the payments space over the coming year.

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Related:

Eight Trends that will Impact Financial Inclusion in 2015

Developing a Safe and Secure Digital Payment Ecosystem to Promote Financial Inclusion

Digital Financial Services, Regulations and Financial Inclusion: Where Are We Headed?