By Melissa Luz T. Lopez, Senior Reporter
INCREASED digital transactions in the Philippines will provide a substantial boost to overall economic growth, the central bank chief said, at a time when the financial technology (fintech) market is seen growing by nearly a fifth annually.
Citing industry data, Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said transactions in the fintech space are expected to grow exponentially in the coming years, which could unlock more robust domestic economic activity.
Mr. Espenilla said amounts processed in the fintech market are projected to hit $5.7 billion this year alone, with yearly growth projected to hit 16.4%.
“By 2022, the fintech market in the country is projected to amount to $10.5 billion,” Mr. Espenilla said in a speech during the National Conference of Employers last week.
The central bank is relying on these online solutions in order to get more Filipinos into using formal channels for payments and borrowings and away from steep margins set by loan sharks.
In turn, broader financial inclusion is expected to lift overall growth prospects.
“Estimates show that the country’s GDP (gross domestic product) could increase by more than 14% if the financial inclusion gap was closed. An important part of this solution is digital enablement,” Mr. Espenilla said, citing World Bank data.
“Digital applications and related regulatory initiatives are expected to boost Philippine GDP by about 3%,” the governor added, noting that this could also lead to an 11% increase in incomes for the country’s poorest segment.
Improved ease of access to money is seen to spur more economic activity.
Remittance costs are likewise seen trimmed to a low of two percent from 7.1% as a share of inbound fund transfers, Mr. Espenilla said, which would be a game-changer as far as the 10 million overseas Filipino workers (OFW) and their families.
OFW remittances — which reached $28.06 billion in 2017 — support domestic consumption, which remains to be a major growth driver for the Philippine economy.
The central bank also issued Circular 1000 on Monday to set the guidelines for the new clearing house that allows real-time transfer of credit across accounts from different banks and e-wallets.
All financial firms part of InstaPay need to maintain a demand deposit account specifically for the settlement or clearing of these instant payments, which shall “prefund” its obligations for fund transfers. Amounts maintained under this account should be raised during longer settlement cycles like weekends and holidays, the BSP said, as InstaPay runs 24/7 and all-year round.
InstaPay will clear transactions worth P50,000 or less, with credit movements expected in a matter of seconds. It is expected to be more high-impact in terms of processing money transfers, as it is expected to give a substantial boost for e-commerce.
The central bank is eyeing to raise the share of e-payments to at least 20% of total transactions by 2020, coming from a measly 1% recorded in 2013.
As of Monday, seven banks can now to send and receive real-time cash transfers, while 11 other lenders and two fintech companies are able to credit payment instructions which they receive from other players.