PhilPaSS REMIT. ELEANOR S. TURARAY Payments and Settlements Office

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1 PhilPaSS REMIT ELEANOR S. TURARAY Payments and Settlements Office 1

2 The Philippine Payments System Interbank Funds/Customer Transfers Overdraft Credit Line Intraday Liquidity Facility GS Trades / Purchases FX Trades / Purchases ATM Network Transfers Philippine Payments and Settlements System (PhilPaSS) BSP Checkless Payments Cash Deposits/ Withdrawals Overseas Filipinos / Worker Remittances E-Redisc/ Loans Duties & Taxes - Revenue Collections Check Clearing

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4 Billion USD Total Overeas Filipino Cash Remittances Asia Americas Europe Oceania Middle East (as of June) Source: 4

5 Remittances account for 9% of country s GDP Overseas workers send more than USD 20 Bn every year since 2010 Total remittances recorded in 2015 is up by 4.6% as compared to the total remittances posted in

6 Modes of Remittance Transmission 1. Credit to Own both OFW remitter and the OFW beneficiary use the SAME bank 2. Advise and Pay beneficiary has no bank account and prefers to pick up the remittance from the nearest bank branch 3. Door-to-Door remitter uses courier services for the physical delivery of remittances to its beneficiaries 4. Credit to Other Banks remitter uses a bank or remittance agent to transmit proceeds to beneficiaries maintaining accounts in a different bank 6

7 PhilPaSS REMIT Background: Increasing volume of OFW remittances Phil. banks presence abroad - overseas branches - tie-up/partnerships with Remittance Agencies Implemented in May 2010 Participants: Commercial Banks, Thrift Banks, Rural Banks Coverage: OFW Remittances for credit to Other Banks Settlement System: PhilPaSS 7

8 Roles of Participating Banks in REMIT Remitting/Sending Bank the bank that sends or transmits the proceeds of remittances to PhilPaSS for credit to the receiving bank (HO) Beneficiary/Receiving Bank the HO-bank that receives the funds from the remitting bank. The HO further credits the beneficiary bank where the OFW beneficiary maintains an account with. 8

9 OF Remittances via PhilPaSS - REMIT Overseas Branch/ Remittance Partner Abroad Participating Bank (A) in the Philippines BSP-PhilPaSS OFW Beneficiary Account with Bank B Funds Transfer from Participating Bank A to Bank B

10 Benefits of REMIT for Overseas Filipinos Lower cost of remittance (front end fees: same) Php Remitting Bank (USD 0.11) Php Beneficiary Bank (USD 1.08) Safer and faster credit to beneficiary-accounts Efficient feedback mechanism earliest - Same Day (1) settlement latest - Day 2 settlement Elimination of related risks/costs (courier series, fraud, theft) Promotes financial inclusion for the unbanked bene

11 BSP as Enabler for REMIT Provides for system connectivity - File Structure Templates - Virtual Private Connection (VPN)/ PKI Connectivity - Technical support NO access/connectivity fees 11

12 Feedback Mechanism Beneficiary Banks are on required to electronically indicate the posting status of each remittance transaction received Accounts of ultimate beneficiaries should be credited on Same Day or up to 4:00PM on Day 2 (due to technical deficiencies) Ex. invalid acct number, closed or dormant account or other erroneous parameters Non-indication of posting status up to 4:00PM (Day 2) will trigger the System s cancellation of the remittance and automatic return of funds to the Remitting Bank. Failure to submit posting status will be subject to penalty for every day of delay. 12

13 REMIT Timelines Cut-off for Remitting Banks to send files to PhilPaSS : 9:00 am to 3:00 pm PhilPaSS settlement window: 9:00 am to 5:45 pm For Beneficiary Banks to indicate posting status on valid OF Bene Account: 9:00 am to 5:45 pm (same day) Cut-off time for Beneficiary Banks to indicate posting status of invalid or Cannot be Posted transactions: Up to 4:00 pm (Day 2) 13

14 Volume and Value of REMIT Transactions YEAR VOLUME VALUE ,841 US$ 300,691, , ,539, , ,070, , ,878, , ,817, (Aug) 378, ,250,377 14

15 PhilPaSS REMIT Member Banks 3 Specialized Government Banks: 12 Commercial Banks: 3 Thrift Banks:

16 National Retail Payments System (NRPS) ELEANOR S. TURARAY Payments and Settlements Office 16

17 Payments Landscape in the Philippines archipelagic barriers pose a big challenge to financial access 31.3% of adults have accounts at a formal financial institution 11.8% of adults has a loan in a formal financial institution in 2015 With at least one banking office Unbanked Financial Access 42% of the total number of deposit accounts 68% are concentrated in NCR of the total amount of deposits 36% of the 1,634 cities and municipalities do not have a banking office

18 Payments Landscape in the Philippines

19 Current Payments Ecosystem Intra-bank Electronic Payment

20 Current Payments Ecosystem Inter-bank Electronic Payment

21 National Retail Payment System (NRPS) National Strategy for Financial Inclusion July A comprehensive public document developed by 13 government agencies to unify initiatives on FI - Provides a platform for coordination and blueprint in designing and implementing financial inclusion policies and programs that focus on four (4) areas to achieve the government s goal of inclusive growth: (1) policy, regulation and supervision (2) financial education and consumer protection (3) advocacy programs and (4) data and measurement 21

22 What is the Philippines NRPS? - The NRPS is a policy and regulatory framework which aims to establish an interoperable, safe, efficient, reliable and affordable retail payment system in the country. NRPS Framework National Retail Payment System (NRPS) - Defines high-level policies, standards and governance principles covering retail payment operations and infrastructures Fast-tracks the establishment of an effective electronic retail payment system Promotes a cash-lite economy to ultimately improve the country s economic competitiveness 22

23 NRPS Vision - To create a safe, efficient, and reliable electronic retail payment system that is interconnected and interoperable to benefit government, business/private sectors, regular consumers and individuals in terms of: 1) speed and efficiency of transactions 2) reduced costs 3) improved transparency 4) enhanced security and 5) expanded access to financial services NRPS Initiatives through a Payments System Management Board (PSMB) - Enable effective and efficient interface and interoperability among players - Foster innovation and new business models - Facilitate the provision of a wide range of products and services with needed certainty, affordability and trust - Ensure transparency 23

24 NRPS Vision: 20% by 2020 Bills Payments Remittances Goods and Services Proceeds of Loans and Investments (interests) Salaries, Allowances, Commissions NRPS Debits and Other Credits Taxes and Licenses Electronic Fund Transfers -11h -10h -09h -08h -07h -06h -05h -04h -03h -02h - +01h +02h +03h +04h +05h +06h +07h +08h +09h +10h +

25 Interbank EFT Credit ACH (Batch) FI OF SENDER 5 Settlement (Debit DDA of OFI) 3 Forward payment instruction to ACH 2 Debit account of Payor/Sender BSP ACH CSO Clearing Switch Operator 5 Settlement (Credit DDA of RFI) 4 Submit clearing results to PhilPaSS 6 Route message to Receiving FI FI OF RECIPIENT 1 Issue payment instruction to Originating FI 7 Credit account of payee 8 Electronic OR SENDER RECIPIENT

26 InstaPay (Credit Push) ACH Consumer Seconds Merchant 1 Sending FI 2 ACH CSO Receiving FI 7 PhilPaSS

27 BSP Policies Payee/beneficiary must receive the amount in full (Sender pays all charges/fees to the transaction) Participants to make EFT service available in all its electronic delivery channels Credit to account of beneficiary within same day for Interbank Batch EFT / immediate credit for InstaPay More frequent settlement with PhilPaSS Establish Settlement Guarantee with BSP Irrevocability of transaction Transparency and Disclosure of Policies and Fees

28 Benefits of NRPS Cost Savings Increased Economic Activities Bigger Market New Business Models 25-56% of invoice processing per annum $1.52 per payment switch from check to direct credit $272 million or 8.5% of net profit after tax of banking sector in 2013 Reduced cash handling cost Faster payment turnover leads to higher economic activities Increased card usage led to 0.06% GDP increase in Asian countries Countries with high level of e- payment txns per capita tend to have high level of per capita income 98% of unbanked Filipinos can be banked through electronic channels Cross selling opportunities Bank and Nonbank partnerships Government and Private partnerships Industry-wide collaboration Reduced Risks Enhanced Risk Management Effective and efficient retail payment system

29 Challenges 1) Lack of legal framework 2) Lack of infrastructure 3) Inconsistent gov t policies 4) Cyber security 5) Uncooperative private sector

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