Business Forum Philippines

Modernising payments for future generations

in The Philippines

April 2016

Michael Moon

Head of Payment Markets | APAC

PH BF Payments 2

The Philippines

7000+ islands

27 years old (avg)20% financial inclusion

100 mio people

110% mobile phones 25 bio o/seas

remittances

National Retail Payment System (NRPS) development is important for all Filipinos

What is NRPS? Well, NRPS envisions Filipinos to have easy

access to financial services and have accounts to make payments,

and receive or transfer funds to other accounts anytime, anywhere,

at a reasonable price from any digital device.

Efficient retail payments contribute to the stability and efficiency of

the financial system and the economy as a whole.

Amando M Tetangco, Jr. on the occasion of BANCNET 25th

Anniversary

PH BF Payments 3

The BSP has established a vision for a National Retail Payment System (NRPS)

To establish a safe, efficient and reliable payment system

Source: BSP

• Efficient interface and

interoperability

• Fosters innovation

• Facilitates wide range of

services with certainty,

affordability and trust

• Transparency

PH BF Payments 4

ASEAN 2025 vision confirmed commitments to the following

Payment & Settlement System enhancements

Capital Account Liberalisation& Market Integration

Global Standards & ISO 20022

Cross-border trade; Remittances; Retail payment systems

Promotion and harmonisation of standards and market practices

Facilitate investment in region through deepening clearing settlement and custody linkages

PH BF Payments 5

Innovation dilemma: future technologies are difficult to predict

We simply only know that it will be different

6

“The pace of change in terms of what

customers are doing, how they pay us, how

they come to us – it’s breathtaking … Any

company that interacts with consumers and

thinks that last week’s technology and

approach is going to work five years from now

is probably making a mistake”

Warren Buffett, March 2013

Interview at The Innovation Project 2013

(Harvard)

PH BF Payments

Infrastructure matters, and financial infrastructure is the backbone of all economies

7

airports

railway

roads

Financial infrastructure is important too

PH BF Payments

The Philippines payment system challenges

PH BF Payments

Inefficiencies

Fragmentation

AccessibilityCost

8

9

Market Infrastructures in The Philippines require

renewal, rationalisation and modernisation

RTP

CashCards

(ATM/POS)

Cheque

(PCHC)Interbank Transfer X-Border

Gcash

SmartMega

Link

Banc Net

National Card

Switch

(BancNet)

Paper E-chequeLVP

NRPS

Express & Bulk

PhilPaSS RTGS

Clearing

Settlement

ACH

(PCHC)

HVP

Mobile

Money

Customer/

Product

Institutions

Remit Correspondent

Banking

Commercial banks, Thrifts, Rurals, NBFCs

Consumer, Business, Government

Systems

NRPS

Corporate Bonds &

Equities

(On-Exchange)

PSE

PDTCBTr - RoSS

OTC/ Government

Bonds

Settlement Banks

SCCP

PDEx

PH BF Payments

There is a major shift in payment systems occurring: 18 markets are live with new national

Retail Payment Systems (RT-RPS) and many more being planned

10

18 countries ‘live’

12 countries ‘exploring’ / ‘planning’ / ‘building’

17 additional Eurozone countries ‘exploring’

Planning

Eurozone

Live

PH BF Payments

PH BF Payments 11

However, Real Time Payments Innovation is not just about going faster

Open AccessSimpler

AddressingAPI to Anything

Intelligent

Messaging

Inclusive -

extended

participant

ecosystem

Regional/global

interoperability

Extensive use of

Digital Channels,

esp. Mobile

Reduced friction for

customer

Centralized

Addressing across

banks

Alias/Proxies

instead of account

numbers

Addressing and

Overlay Services

integration

Consumed by

Corporates,

SMEs, Govt.

organizations

Transfer of

information, not

simply value

Information rich

ISO 20022

So how does The Philippines industry address this challenge?

PH BF Payments 12

A National Retail Payment System (NRPS) in the Philippines must …

• Include large non-banking populations

• Rationalise existing infrastructures for efficiency & scalability

• Support government needs of monitoring payments

• Be flexible and adaptable for future generations

• Support future payment innovation and technology change

• Be highly available, safe, secure

PH BF Payments 13

An open, scalable, flexible NPRS can support financial inclusion in the Philippines

PH BF Payments

Basic Infrastructure

Dir

ect

Part

icip

an

ts

Ind

irec

t

Part

icip

an

ts Addressing Database

Switch

Network

Se

ttle

me

nt

Se

rvic

e

Overlay Services

Real-time

24/7

ISO 20022

Addressing database

Connected services

such as Mobile

Payments

14

In Australia SWIFT is currently building the infrastructure supporting the next

generation payment platform known as the “New Payments Platform”, or NPP

Basic Infrastructure

Dir

ect

Part

icip

an

ts

Ind

irec

t

Part

icip

an

ts

Addressing Database

Switch

Network

Se

ttle

me

nt

Se

rvic

e

Overlay Services

15PH BF Payments

Practically speaking, the The Philippines can pursue the following

PH BF Payments

Outline a layer-based NRPS:

- innovation layer

- settlement layer

- clearing layer

Industry roadmap for ISO 20022 adoption

Form an industry working group

Establish core principles for NRPS

Tap into global expertise

16

The Philippines and ISO 20022

PH BF Payments 17

recommended

reading