THE BANGKO SENTRAL ng Pilipinas (BSP) is targeting to complete a blueprint for instant cross-border payments this year, which is expected to be one of the more affordable multinational remittance services in the market, according to an official.
“The BSP is working on cross-border payments. We will be completing the blueprint of this scheme this year,” BSP Deputy Governor Mamerto E. Tangonan said.
The central bank is targeting to implement cross-border payment connectivity in the next two years as it seeks to keep up with its Association of Southeast Asian Nations (ASEAN) peers.
In March last year, the BSP and four other central banks in the region announced they will connect their domestic instant payment systems (IPS) through the Bank for International Settlements’ (BIS) Nexus Project.
The Nexus, a prototype developed by the BIS Innovation Hub Singapore Centre, connects payment system operators with the Eurosystem’s TARGET Instant Payment Settlement (TIPS), Malaysia’s Real-time Retail Payments Platform (RPP) and Singapore’s Fast and Secure Transfers (FAST).
In November 2022, the BSP signed a memorandum of understanding (MoU) with other central banks in the ASEAN region to strengthen collaboration on regional payment connectivity (RPC).
The RPC is expected to contribute to accelerating economic recovery and promoting growth as it aims to foster a more inclusive financial ecosystem by enabling fast, seamless, and cheaper cross-border payments across the region.
The cooperation will include a number of modalities, including quick response (QR) code and fast payments.
According to Mr. Tangonan, Filipinos who have their own domestic e-wallet accounts or bank accounts, will be able to send money in local currency to a counterparty in Malaysia, Singapore, Thailand, and Indonesia.
“We have a large Filipino community based in Singapore. We anticipate that this will bring a lot of benefits for them because we’re working to make this one of the least expensive cross-border remittance service in the market,” he said.
He also said cross-border fund transfers may start first with person-to-person (P2P) transactions, before the BSP can do merchant payments.
For merchant payments, Mr. Tangonan said that if a Filipino goes to another country in the ASEAN region, there would be no need to convert pesos into other currencies.
“If you buy from merchants or if you pay restaurants (in another country), you can scan their QR codes,” he said. “You can use their standard QR code (even if) you’re using a Philippine account in your mobile app, and you’ll be able to pay.”
Tourists from other countries who are visiting the Philippines would also be able to scan the BSP’s QR Ph, he said.
“We’re going to start regional, but the outlook is global. This is a solid stepping stone for us to be able to reach and offer this network service to other regional payments networks,” he said.
He added that the countries in the Middle East, North America, and Europe are hosts of large Filipino communities which would be able to benefit from cross-border payment services.
PROJECT AGILAMeanwhile, Mr. Tangonan said the Philippine central bank will assess and publish a report on Project Agila, the BSP’s wholesale Central Bank Digital Currency (CBDC) pilot project that was previously known as Project CBDCPh.
“We’re doing this because wholesale CBDC presents to us huge opportunities for even increasing the safety and efficiency of large value payments,” he said.
“In our previous assessment, (there are) huge benefits that can be gained from using wholesale CBDCs for cross-border payments. I’m talking large value payments and not just P2P remittance,” he said.
Last year in September, the BSP designated Hyperledger Fabric as the distributed ledger technology for Project Agila. The central bank has said that the technology will allow data and transactions to be recorded, shared, and synchronized across a distributed network of different participants.
There are six financial institutions participating in the pilot project: BDO Unibank, Inc.; China Banking Corp.; Land Bank of the Philippines; Rizal Commercial Banking Corp.; Union Bank of the Philippines; and Maya Philippines, Inc.
Meanwhile, the observing financial institutions for the succeeding stages include Citibank N. A. Manila, China Bank Savings, Wealth Development Bank Corp., and SeaBank Philippines, Inc.
Mr. Tangonan also said the BSP is working with the Bureau of Treasury to increase the efficiency of access to government securities, corporate bonds, or other similar securities.
“Our goal is (every) small amount… will be within the reach of Juan and Maria,” he said. “(CBDCs) will broaden access to government securities, which is good for the government, the issuer, and also good for the public because they can earn more from their savings.”
CBDCs are issued as central bank liabilities. Since 2021, the BSP has been reviewing use cases for wholesale CBDCs, as well as the potential risks and use of CBDC payments among financial institutions.
The BSP earlier said it sees opportunities from CBDCs, such as being an additional option for monetary policy action, boosting competition and innovation among financial industry players, and improved financial inclusion. — Keisha B. Ta-asan
