NATIONAL RETAIL PAYMENT SYSTEM & Proposed Payment Systems Act (House Bill No. 6197 & Senate Bill No. 3207)

Presentation to Payment Providers and other Stakeholders The Lounge, BSP Executive Business Center

BSP Complex, Mabini, Manila

14 March 2016

I. National Retail Payment System (NRPS) A. Rationale

B. What is NRPS and its Objectives

C. NRPS Vision

II. The Proposed Payment System Act (PSA) A. Policy Objectives

B. Salient Features

AGENDA

I. NRPS (National Retail Payment System)

36%

of the 1,634 cities and municipalities do not have a banking office

With at least one banking office Unbanked

archipelagic barriers pose a big challenge to financial access

of adults have an account at a formal financial institution

31.3% of adults had a loan in a formal

financial institution in the past year

11.8%

42%

68%

of the total number of deposit accounts

of the total amount of deposits

are concentrated in NCR

A. Rationale – Financial Access

• Of the 2.5 billion monthly transactions (volume) only 1% are electronic payments (BTCA)

• Only 30% have bank account, 3% with credit card and 13% a debit card (World Bank)

• Maintain multiple accounts with several banks

• Overwhelming use of checks and deployment of manual processes to pay suppliers/creditors

• Small but formal businesses are not able to use checks

• Key barrier for electronic payments - limited level of financial inclusion, intertwined with the sheer size of the informal sector

A. Rationale – Current Situation

2.5 Bn monthly transactions only 1% are made via electronic means *

• ATMs used mainly for cash withdrawals

• Mobile money served as cash servicing through agents

Limited interoperability among Payment Service Providers

• Limited interbank fund transfer

• High cost of moving funds

• Slow flow of funds

• Lower productivity

Electronic access to Interbank Fund Transfer facility is not generally available

A. Rationale - Challenges

* BTCA study 2013/2014

Low adoption of e-payments B2B, B2G, B2P P2B, P2G, P2P

NRPS

A policy and regulatory framework which aims to establish a safe,

efficient, reliable and affordable retail payment system in the

Philippines

* Enables effective and efficient interface and interoperability among players

* Fosters innovation and new business models

* Facilitates the provision of a wide range of products and services with needed

certainty, affordability and trust

*Ensures transparency

B. The National Retail Payment System (NRPS)

Goods and Services

Remittances

Debits and Other Credits

Proceeds of Loans and Investments

(interests)

Bills Payments

Taxes and Licenses

Electronic Fund Transfers

Salaries, Allowances, Commissions

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01h 00h

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NRPS

C. NRPS Vision

Current E-Payment System

CLEARING

1 Instruct to pay merchant/recipient, net of tax

2 Forward instruction

SENDING INSTITUTION

SENDER

6

Settlement

3 Route message to Receiving FI

4 Credit to account

5 Submit net clearing results for settlement

RECEIVING INSTITUTION

RECIPIENT

6 Settlement

BSP

Settlement

C. NRPS Vision – Electronic Payment

1 FI credits

Account of Client

2 Client has option to

pay for goods electronically via any digital device

3 Client instructs his/her bank to pay Merchant

6 Merchant releases goods to

Client

4 Client’s bank

transfers fund to Merchant’s bank

account

5 Bank notifies Merchant that account was credited

E Merchant instructs bank to pay amount to Distributor’s bank

A. Shop orders supplies from Distributor

B. Distributor sends Sales Invoice to Merchant

F Merchant’s bank transfers fund

to Distributor’s bank account

G Bank notifies Distributor that account was credited

C. NRPS Vision – Increase Access to Finance

Client

Merchant

Distributor

II. Proposed PSA (Proposed Payment Systems Act)

House Bill No. 6197 - Sponsor: Rep. Sonny Collantes - Passed Third Reading (Sixteenth Congress)

Senate Bill No. 3207 - Sponsor: Sen. Bam Aquino - Pending at the Senate Committee level

Policy Objectives

Safe, efficient and reliable

payment systems

Stability and effectiveness of monetary and

financial system

Control

systemic

risk

Sustainable economic

growth

Salient features

Roles of BSP

Oversight

Supervision and Regulation

Enforcement

Designation of payment systems

Criteria

Effects

Payment System

Management Body

Members = participants

Self-regulating

Enforce rules

Operations of payment systems

Responsibilities of participants

Finality and Netting

Q & A