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Biden advisers say pandemic, not policies, fueling inflation

WASHINGTON — US President Joseph R. Biden, Jr.’s economic advisers defended his policies on Sunday amid rising inflation that they said was a global issue related to the coronavirus disease 2019 (COVID-19) pandemic, not a result of the administration’s programs.  

US consumer prices last week posted their biggest annual gain in 31 years, driven by surges in the cost of gasoline and other goods. Republicans have pounced on inflation worries, claiming that the increase reflects Biden’s sweeping spending agenda.  

“There’s no doubt inflation is high right now. It’s affecting Americans’ pocketbooks. It’s affecting their outlook,” Brian Deese, director of the White House National Economic Council, said on NBC’s Meet the Press. “But it’s important that we put this in context. When the president took office, we were facing an all-out economic crisis.”  

The United States is hardly alone in enduring a bout of stiff inflation, with the Organization for Economic Cooperation and Development showing inflation running high across its 38 member countries and oil prices quadrupling in the last 18 months as economies reopened from COVID-19 shutdowns.  

On Monday, Mr. Biden is scheduled to sign a $1 trillion bipartisan infrastructure bill that is expected to create jobs across the country by dispersing billions of dollars to state and local governments to fix crumbling bridges and roads, and expanding broadband internet access to millions of Americans.  

Treasury Secretary Janet Yellen and Mr. Deese in separate television appearances said they expect that measure, as well as the $1.75 trillion “Build Back Better” domestic spending and climate investment bill to help bring down inflation.  

“There’s an urgency to act,” Mr. Deese said on CNN.  

Mr. Deese said he was confident that House of Representatives Speaker Nancy Pelosi would bring the “Build Back Better” bill to a vote this week. That, however, will only be a first step as the Senate has not yet taken up the bill, and Democratic divisions could threaten its chances in that chamber.  

Senate Majority Leader Chuck Schumer in an open letter to fellow Democrats on Sunday said his chamber will not take up the bill until the House passes it. Congress faces an extremely crowded agenda in the month ahead as it also needs to avert an economically catastrophic debt default by the federal government and a partial government shutdown that would be politically embarrassing for Democrats.  

SLIDING APPROVAL 
High inflation is eroding wage gains, adding to political risk for Mr. Biden, whose approval rating has been falling as Americans grow more anxious about the economy. Broadening inflationary pressures could also complicate the Federal Reserve’s communication. The Fed this month restated that high inflation is “expected to be transitory.”  

“The problem is the Democrats are now saying we want to go all in with this massive tax and spending bill,” Republican Senator John Barrasso said on ABC’s This Week. “People are going to pay higher prices.”  

The White House regularly cites support for the Build Back Better plan from 17 Nobel laureates who say it will ease longer-term inflation.  

Mr. Biden’s $1.9 trillion American Rescue Plan stimulus package in March helped Americans weather the pandemic and today spending is strong and demand is strong, Ms. Yellen said on CBS’ Face the Nation. 

However, the supply of goods and of workers remains low, she noted, and the federal government is scrambling to unblock global supply chains affected by the pandemic.  

Ms. Yellen has said she expects prices to go back to normal by the second half of next year if the pandemic continues to wane.  

“The pandemic has been calling the shots for the economy and for inflation,” Ms. Yellen said. “And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do.”  

Mr. Biden and his top economic advisers have for months predicted that inflation would be a short-term problem.  

Asked on CNN’s State of the Union if they were wrong, Mr. Deese said, “No, I don’t think so” and pointed to the strength of the US economic recovery.  

Former Treasury Secretary Larry Summers, a Democrat who warned in February the American Rescue Plan could fuel inflation, said on Sunday he supported both the infrastructure and Build Back Better bills because they make long-term investments.  

“We will sacrifice our country’s future … and we won’t make any meaningful contribution to reducing inflation, if we vote down this bill,” Mr. Summers said on CNN’s Fareed Zakaria GPS. — Doina Chiacu/Reuters  

COP26 message to business: clean up to cash in

REUTERS

GLASGOW — The hard-fought Glasgow Climate Pact sent a clear message to global companies and executives: reassess business strategies and carbon footprints to reap monetary rewards, or lag and risk losses.  

The deal announced late Saturday, ending two weeks of fraught negotiations between nearly 200 nations, pushes countries to do much more to curb climate-warming carbon emissions. That pressure will increasingly be imposed on investment and industry to bring emissions associated with their businesses in check.  

The Glasgow pact also delivered a breakthrough on rules for governing carbon markets, and took aim at fossil fuel subsidies.  

Beyond the political negotiations, the Glasgow gathering brought in many of the world’s top CEOs, mayors, and leaders in industries, including finance, construction, vehicles and aviation, agriculture, renewable energy and infrastructure.  

“COP26 has unleashed a wall of new private sector money,” said Gregory Barker, executive chairman at energy and aluminum company EN+ Group, by e-mail. “For business everywhere, one thing is certain, big change is coming and coming fast.”  

Two separate investment conferences on the side of the UN climate summit touted profits to be made for those who meet environmental conditions for the cash. Many deals were announced, including plans for a standards body to scrutinize corporate climate disclosures that will challenge boardrooms.  

GOAL OF 1.5 DEGREES 
With the pact reaffirming a global commitment to containing global warming at 1.5 degrees Celsius (2.7 Fahrenheit), along with “accelerated action in this critical decade,” boards can expect tougher national pollution policies across all sectors, particularly in transport, energy and farming.  

That will leave the companies without a plan to adapt to a low-carbon economy looking exposed, UN High-level Climate Action Champion Nigel Topping said.  

“If you haven’t got a net-zero target now, you’re looking like you don’t care about the next generation, and you’re not paying attention to regulations coming down the pipe,” Mr. Topping said. “Your credit rating’s at risk, and your ability to attract and keep talent is at risk.”  

Adding to the pressure, financial services firms with around $130 trillion in assets have pledged to align their business with the net-zero goal. Increasingly, they will lean on the boards of corporate climate laggards.  

CARBON MARKETS 
The summit’s deal resolving rules for the global trading of carbon offset credits was applauded by business for its potential to unlock trillions of dollars in finance to help countries and companies manage the energy transition.  

Observers said the agreed rules addressed the biggest worries and would likely prevent most abuses of the system.  

The non-profit We Mean Business coalition, which works with corporates on climate, said the rules “have the potential to unleash huge investments.”  

By putting in place the framework for a global trading system, the pact also brings the world closer to having a worldwide price on carbon — demanded as a priority by investors and companies before the talks.  

A global price would allow companies to more accurately assess the value of assets, as well as costly externalities — driving more climate-aligned decisions on anything from where to build factories to which companies to buy or products to launch.  

With carbon offsets tied to efforts to preserve nature, more than 100 global leaders to halt and reverse deforestation by 2030. Companies and investors also said they would ramp up forest-protection efforts.  

FOSSIL FUELS 
For the first time, the deal saw countries acknowledge that fossil fuels were the main cause of climate change, and called for an end to “inefficient fossil fuel subsidies.” It did not say how to determine if subsidies could be justified.  

It singled out coal, the most polluting of the fossil fuels, though at the 11th hour switched from urging a “phase out” in coal-fired power to a “phase down.”  

The change in wording, following objections by India, China and other coal-dependent nations, was seen by developing economies as an acknowledgement that industrialized nations are mostly responsible for the climate problem. But many in wealthy economies worried it could mean years more of unbridled emissions as developing nations grow.  

Calling the move “dangerous and damaging for the climate,” Germany’s biggest industry association warned it could hobble its industries as they are forced to abandon the cheap fossil fuel international competitors can still use.  

“This concentrates emissions in countries with less stringent climate measures and unilaterally wears on companies that already need to cope with large financial burdens,” the Federation of German Industry said Sunday.  

Still, the very mention of coal and fossil fuels in the Glasgow pact was hailed as progress in UN climate talks, which for decades have skirted the issue.  

Saker Nusseibeh, chief executive of the international business of asset manager Federated Hermes said the result would put pressure on some oil companies that were “not as forthcoming as others.”  

He also said “coal companies will have to think very carefully about their future plans.”  

Meanwhile, the world’s biggest economies are driving the shift.  

The top two, the United States and China announced plans to cooperate on climate action, including bringing down emissions of the potent greenhouse gas methane.  

Elsewhere, six countries, including France, joined the Beyond Oil and Gas Alliance, committing to halting new oil and gas drilling.  

Twenty countries including the United States and Canada pledged to halt public financing of fossil fuel projects overseas, and 23 nations promised to phase out coal-fired power.  

A number of companies in sectors including transport are already betting big on increased electrification, with U.S. car makers Ford and General Motors among those saying they will phase out fossil fuel vehicles by 2040.  

The Glasgow talks have “drawn attention to the great opportunities arising from a different form of development —  stronger, cleaner, more efficient, more resilient and more inclusive,” said climate economist Nicholas Stern. The breakthroughs “seek to make clean and green production competitive in all these areas by 2030.” — Simon Jessop, Jake Spring, and Ross Kerber/Reuters 

PSBC, GRI ink agreement on Sustainability Reporting Advancement Initiatives

The Philippine-Swiss Business Council (PSBC) and the Global Reporting Initiative (GRI) signed a Memorandum of Understanding to set out a framework for cooperation on “Sustainability Reporting Advancement Initiatives”. Photo shows (from left) H.E. Alain Gaschen, Swiss Ambassador to the Philippines; Ms. Allinnettes Adigue, GRI ASEAN Regional Hub Head; Ms. Christine Fajardo, PSBC Chairperson & Corporate Affairs Head of Novartis Philippines; and Ms. Ma. Katreena Pillejera, GRI Country Manager – Philippines, at the PSBC Hybrid General Membership Meeting (GMM) held on 10 November 2021 at the Seda Hotel Rooftop in Makati City.

The Philippine-Swiss Business Council (PSBC) and Global Reporting Initiative (GRI) signed a Memorandum of Understanding to set out a framework for cooperation on “Sustainability Reporting Advancement Initiatives”. Through the MoU, PSBC with the support of GRI aims to help accelerate the achievement of the Sustainable Development Goals (SDGs) and sustainability reporting in the Philippines.

The MoU was signed by GRI Chief Financial Officer Ms. Dani Marunovic and Ms. Christine Fajardo, PSBC Chairperson and Corporate Affairs Head of Novartis Philippines. The MoU signing was witnessed by Ambassador Alain Gaschen representing the Swiss federal government’s State Secretariat for Economic Affairs (SECO). The ceremony was also attended by Ms. Allinnettes Adigue, GRI ASEAN Regional Hub Head, and Ms. Ma. Katreena Pillejera, GRI Country Manager – Philippines.

Ms. Fajardo announced the MoU signing during the PSBC Hybrid General Membership Meeting (GMM) on 10 November 2021. Selected participants attended the onsite meeting at the Seda Hotel Rooftop in Makati City and the rest of the participants joined virtually via Zoom. Health and safety protocols were strictly observed at the onsite meeting. All onsite attendees presented proof of full vaccination, and took a rapid antigen test provided by the organizer prior to the meeting.

The MoU involves the following key actions:

  • Deliver an Impact Study spearheaded by PSBC and supported by GRI. The Impact Study will cover PSBC member-companies by highlighting their sustainability contributions to the community
  • Establish a relationship with PSBC member-companies by raising awareness on the business case of sustainability and building capacity for accountability and transparency through sustainability reporting

“We are honored to partner with GRI on our Sustainability Reporting Advancement Initiatives. As a business council, we aim to integrate our members’ contributions in rebuilding the business ecosystem. With the support of SECO-GRI, PSBC intends to step up the communication of our member companies’ social, environmental, and economic impact on society, and facilitate capacity training on sustainability reporting,” said Ms. Fajardo.

“GRI is really honored to be able to work with PSBC under the framework of our Sustainability Reporting for Responsible Business Program supported by SECO. We are looking forward to help catalyze PSBC members to be champions in showing the transformation into more resilient and sustainable business. We believe sustainability reporting will help you to do a systemic transformation and mobilize all your stakeholders in working together for a transparent and accountable future,” said Ms. Pillejera.

“We are happy that our SECO`s Sustainability Reporting for Responsible Business Program is taking footprint in the Philippines. We are committed to increasing high-quality sustainability disclosure and accountability, and are excited to have the PSBC on-board as we promote ‘Swisstainable’ solutions to global challenges,” said Ambassador Gaschen.

In line with its advocacy to communicate its member companies’ environmental, social and governance (ESG) impact on society, the PSBC recently launched its Impact Stories Initiative that aim to demonstrate the council’s strong commitment to responsible business. Member companies have until November 30, 2021 to submit their Impact Stories to psbcimpact@gmail.com. The first seven companies that submitted their Impact Stories are:1

  • Stamm International’s logistical support to Caritas Switzerland has enabled 40,000 metric tons of construction material to reach remote islands without infrastructure. In Hinoba-an, Negros Occidental, the third school building project in the Philippines was realized with the support of NAK-HUMANITAS in Switzerland despite the challenges of Covid.
  • A world leader in recycling, Holcim co-processed close to 130,000 tons of qualified wastes from local governments, industry partners and agricultural processors in Luzon and Mindanao plants, thus preventing these materials from ending in landfills and seas.
  • In terms of social impact, Novartis medicines reached 2.2M Filipino patients. Novartis focused on helping strengthen the country’s healthcare system. To help enhance eye care, we collaborated with the Fred Hollows Foundation, Vitreo-Retina Society of the Philippines, and National Committee for Sight Preservation to provide eye health education to over one million patients, screen more than 70 thousand patients, and treat over 4,500 patients despite community quarantine restrictions.2
  • Nestle Philippines has become the first and only multinational fast-moving consumer goods company to become plastic neutral.
  • Ivoclar Vivadent, which employs 350 Filipinos, has been shipping its dental care products from the Philippines to 5 markets despite pandemic-related manufacturing limitations.
  • In support of green living, DDC Land utilizes electrical technology that cleanses impurities flowing into its residential units, resulting in lower energy consumption.
  • ai worked with the government in monitoring Covid infections across the archipelago and digitizing Red Cross Covid testing facilities.

References:

  1. PSBC Impact Stories submitted entries, data on file
  2. Novartis Philippines data on file, submitted as entry to PSBC Impact Stories

 

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China regulator proposes cybersecurity review for some Hong Kong IPOs

BEIJING — China’s cyberspace regulator on Sunday proposed requiring companies pursuing share listings in Hong Kong to apply for cybersecurity inspections if they handle data that concerns national security.  

Large internet platforms planning to set up headquarters, operating or research centers abroad should also submit a report to regulators, the Cyberspace Administration of China said in the draft rules.  

The document, published on the regulator’s WeChat account website, calls for requiring public comment on internet platforms formulating privacy policies or making amending rules that could significantly affect user rights and interests.  

Firms with more than 100 million daily active users would need to have changes reviewed by third-party agencies and obtain government approval.  

Companies that provide instant messaging services should, unless they have justifiable reasons, stop restricting users from accessing or transferring files to other Internet platforms, the regulator said.  

The proposals, open to public review until Dec. 13., come as Beijing tightens its oversight over its technology sector with rules on how they should handle the vast troves of data they control, treat users and interact with rivals.  

China, which has recently passed laws on data security and personal information protection, is looking to set up governance rules for how firms use algorithms. It has also urged firms to stop a long-used “walled gardens” practice that prevents rivals’ links and services from being shared on their platforms.  

The agency in July proposed that companies with data for more than 1 million users should undergo a security review before listing shares overseas, just days after suspending the initial public offering of ride-hailing giant Didi Chuxing over alleged data violations. — Reuters

Russia starts missile supplies to India despite US sanctions risk

Image of S-400 missile system via Vitaly V. Kuzmin/CC BY-SA 4.0/Wikimedia Commons

MOSCOW — Russia has started supplying India with S-400 air defense missile systems, Russian news agencies reported on Sunday citing Dmitry Shugayev, the head of the Russian military cooperation agency.  

The supplies put India at risk of sanctions from the United States under a 2017 US law aimed at deterring countries from buying Russian military hardware.  

“The first supplies have already been started,” Interfax cited Mr. Shugayev as saying on Sunday at an aerospace trade show in Dubai.  

He said that the first unit of an S-400 systems will arrive in India by the end of this year.  

The $5.5 billion deal for five long-range surface-to-air missile systems, which India says it needs to counter a threat from China, was signed in 2018.  

India faces a range of financial sanctions from the United States under Countering America’s Adversaries Through Sanctions Act (CAATSA), which names Russia an adversary alongside North Korea and Iran for its actions against Ukraine, interference in the US 2016 elections and help to Syria.  

New Delhi said it has a strategic partnership with both the United States and Russia while Washington told India it was unlikely to get a waiver from CAATSA.  

Last year the United States imposed sanctions citing CAATSA on NATO ally Turkey for acquiring S-400 missiles from Russia. The sanctions targeted the main Turkish defense procurement and development body Presidency of Defence Industries.  

Washington also removed Turkey from a F-35 stealth fighter jet program, the most advanced aircraft in the US arsenal, used by NATO members and other US allies.  

Russia said it had offered Turkey its help in developing advanced fighter jets but no agreement has been reached so far.  

“We are still at a stage of negotiations on this project,” RIA new agency quoted Mr. Shugayev as saying on Sunday. — Reuters

[B-SIDE Podcast] Moving to the cloud, towards sustainability and resiliency 

(This B-Side episode is sponsored by Tata Consultancy Services Philippines.)

The pandemic has pushed businesses into investing in cloud software and services as evidenced by a study released early this year by Alibaba Cloud, which found that 74% of local businesses see hybrid cloud solutions as key to their disaster recovery and business continuity efforts.

In this B-Side episode, Shiju Varghese, president and country head of Tata Consultancy Services Philippines, explains what separates a successful cloud migration from a failed one.

“There’s a common mistake that enterprises make: that is wanting to take the journey with their existing skillset and existing team that are not possibly ready or experienced enough to make them successful,” Mr. Varghese tells Adrian Paul B. Conoza, BusinessWorld special features assistant editor.

Arnel “Bon” de Vera, chief information officer at Sky Cable Corporation, also shares how the provider grew its business by shifting to the cloud.

TAKEAWAYS

Cloud migration takes preparation and collaboration.

Mr. Varghese advised businesses to look into their organizational change management framework and determine how functions, departments, and stakeholders will operate in the new environment that the cloud will bring.

Looking for partners equipped with the necessary experience, skillset, and tools in cloud migration will also ease the transition, he added.

According to Mr. De Vera, Sky chose TCS based on its breadth and depth of knowledge and experience in digital transformation.

Cloud’s benefits outweigh its cost.

Cloud migration requires investment, but companies will end up paying a higher price if they continue using outdated systems. These include a sluggish response to changing market conditions; the slow pace of innovation; the existence of inflexibility in systems and applications; and the unpredictability of cost in running operations.

“When you look at the benefits you get by getting rid of these old cost factors, the benefits of spending on migration really outweigh the costs you are incurring,” Mr. Varghese said.

Migration can start small.

“We do recommend our customers to take a phased approach instead of a ‘big bang.’ Organizations can move portions of an organization to the cloud, based on the landscape of the enterprise,” Mr. Varghese said.

What portions to migrate, however, will depend on business priorities.

“In some cases, there are organizations who first take their finance [departments] completely to the cloud,” Mr. Varghese said. “There are [some] who take their customer life cycle/customer experience onto the cloud first.”

Recorded remotely on Oct. 14, 2021. Produced by Paolo L. Lopez and Sam L. Marcelo.

Embarking on a journey towards digital economy

Photo from freepik

One of the biggest and most important differences between the world before and after coronavirus disease 2019 (COVID-19) is invisible to the naked eye. That is, if you’re not looking at a screen.

The pandemic brought the world to its knees in 2020, forcing governments to close off borders and impose quarantine measures to contain the spread of the virus. With everything physical essentially shut down and face-to-face contact becoming discouraged, people flocked to the only available alternative — the digital world.

Now, thanks to internet connectivity, many of the activities people used to enjoy before COVID have found a digital counterpart, from ordering food from restaurants to going shopping or even getting a doctor’s prescription. Powering these digital transformations is the growth of e-wallets, virtual currencies, and other cashless payment options, all of which have been newly accepted into mainstream culture.

According to the Bangko Sentral ng Pilipinas (BSP), digital payments made up 20.1% of all transactions in 2020 — meaning that one in five payments or a total of 910 million transactions were done online. BSP Governor Benjamin E. Diokno noted that this is a rise of 10.1 percentage points from the 10% total transaction volume recorded in 2018.

“We are seeing an accelerated rate of increase in the usage of digital payments. This could strongly indicate that Filipino consumers are moving away from conventional cash payments toward digital payments,” Mr. Diokno said.

“While the COVID-19 pandemic may have disrupted our way of life, it also created exceptional opportunities to boost digital payments and financial inclusion in the country,” he added.

Behind the rise in the share of digital payments are payment-to-merchant and person-to-person payments, which grew by 47.8% and 18.1% year on year, respectively. Meanwhile, digital transactions made up 26.8% of total transactions in terms of value in 2020, up by 6.8 percentage points from the 20% share seen in 2018.

Mr. Diokno further pointed out that the government’s efforts to fully digitalize its payment of employee salaries of government employees last year contributed to the higher volume of online transactions. It also pushed the government to become the most cash-lite in 2020, as 93.2% of its payments were done digitally. This was followed by individuals (23.4%) and businesses (5.4%).

Long way to financial inclusion

The central bank had long been a proponent of shifting the Philippines into a cash-lite economy, as it previously announced its target of raising the share of digital payments to 50% of all retail transactions and expand financial inclusion to 70% of Filipino adults by 2023. These goals were outlined in the Digital Payments Transformation Roadmap 2020-2023 that it unveiled last year.

Digital payments are a powerful tool towards achieving financial inclusion, as they have the added benefit of being easily accessible through any modern mobile device. According to the BSP data, about 51.2 million adult Filipinos remained unbanked as of 2019, with only 29% of the adult population owning a formal financial account.

A study by US-based VMWare, Inc. found that 76% of Filipino consumers are open to tapping digital payments. While this is smaller than those in neighboring countries like Singapore (88%), Malaysia (87%), Indonesia (90%), and Thailand (85%), the potential of getting a significant number of Filipinos into the financial system is there.

Based on the study, more than half (55%) of Filipino respondents now prefer doing banking services through apps over branch transactions, as many (62%) find that digital engagements save them time. Furthermore, 63% of Filipino consumers believe their phones are more important than their wallets for their financial transactions.

The Better Than Cash Alliance (BTCA), a United Nations-based partnership of governments, companies and international organizations aimed at accelerating the transition from cash to digital payments, noted that the Philippine government’s COVID-19 response have also done a lot to boost awareness and use of digital payments. Through the efforts of the BSP, the Department of Social Welfare and Development (DSWD), and the Department of Labor and Employment, many Filipinos were exposed to digital payment platforms through the digital delivery of emergency subsidies, conversion of cash cards to transaction accounts, and digital salary payments.

“This is testimony to the need for coordinated focus and action by whole of government to achieve digital payment transformation at scale,” BTCA wrote in its State of Digital Payments in the Philippines 2019-2020 report.

Particularly, the organization noted that the second tranche of the Social Amelioration Program of the DSWD was primarily disbursed through nearly 10 million newly created transaction accounts, which significantly boosted financial inclusion in 2020. This is in addition to efforts to convert the limited-purpose cash cards used for its Pantawid Pamilyang Pilipino Program (4Ps) into full-service transaction accounts.

“Social aid beneficiaries can prospectively use the funds received to make various payments for food, clothing, and other essential needs through these full-service transaction accounts. Plans for a new unified beneficiary database for DSWD programs and the expansion of payment options for beneficiaries are under way. The integration with the new national ID system (PhilSys) will also enable timely and reliable verification and enrolment of new beneficiaries,” BTCA wrote.

The Department of Transportation also gained recognition for its efforts toward the further digitization of payments through the implementation of the Automatic Fare Collection System (AFCS), designed to benefit both passengers and operators through seamless, interoperable, and contactless fare collection. All tollway operators have also been mandated to implement cashless toll collections on all expressways and major toll roads.

“COVID-19 has created an opportunity to ensure all payments are responsible. The COVID-19 crisis has seen a global wake-up call on the importance of a digital ecosystem that enables the continuation of social and business interactions and commerce. The pandemic has helped to boost adoption of digital payments,” BTCA observed.

“In the Philippines, earlier investments to develop a National Retail Payment System founded on interoperability paved the way to reap the benefits of digital payments in times of crisis. In this period of rapid digitization, it is imperative to ensure that the digital divide is not exacerbated. This translates to a firm commitment to equitable access to digital payments and data protection for all Filipinos, as well as providing a better value proposition to traditionally underserved groups, by working to include lower income people, micro and small businesses, and women, in every possible way.” — Bjorn Biel M. Beltran

A shared responsibility between institutions, consumers

Digital payments are becoming a part of people’s lifestyles in the new normal as consumers are further adopting electronic wallets, online banking, and e-commerce platforms, to name a few. A survey by Mastercard across 18 markets globally show that 90% of the consumers were found to have tried at least one emerging payment type in the last year, while 60% would like to shy away from merchants who do not offer electronic payments of any kind.

Along with this increased adoption of digital payments, however, there is also a heightened concern over cybersecurity. Mastercard’s survey noted that one out of four consumers have experienced online fraud last year as a result of lockdowns during the pandemic. In addition, the Philippines was found by cybersecurity firm Kaspersky to have the highest number of users attacked by banking malicious software, particularly Trojans, accounting for 22.26% of all banking Trojans discovered in the Asia-Pacific this year.

How do authorities ensure safety in digital payments, so far? As law firm Disini & Disini explained in its Data Privacy Philippines website, the Bangko Sentral ng Pilipinas (BSP) provided several ways for consumers and users to be protected.

First, the BSP requires electronic money issuers (EMI) to maintain a record-keeping system for storing the e-money instruments issued, the identity of e-money holders, and individual and consolidated balances.

The BSP also requires EMIs to maintain a redress mechanism that would allow customers to file complaints. Moreover, these issuers, before they operate, should have minimum risk management systems and controls such as internal controls, properly designed-and-tested computer systems, appropriate security policies and measures, business continuity and recovery plans, audit function, and compliance with Anti-Money Laundering Act (AMLA) regulations.

“To bolster protection in cashless payments, [the] BSP has issued Circular No. 808 to tighten cybersecurity protocols. In order to manage IT risks and information security issues, [the] BSP requires EMIs to establish a robust IT Risk Management (ITRM) System that covers IT governance, risk identification and assessment, IT controls implementation, and risk measurement and monitoring,” the law firm added.

While these measures — and much more like one-time passcodes or two-step verification — essentially help, consumers themselves still have a responsibility to be vigilant and mindful of their transactions. This involves protecting their passwords; not sharing sensitive information; and being careful against frauds, malware, and other cyberthreats.

As the Financial Consumer Protection Department of the BSP advises in a primer, users should create and use a password that is long; cannot be easily guessed by anyone else; contains a combination of characters; and does not contain personal information such as birthday, name of partner or child, or mobile number.

To create a password that is difficult to guess but still easy to remember, the BSP suggests, think of a sentence or a phrase that can be easily recalled. Determine its acronym, then decide which characters can be changed to symbols or numbers. Then, determine which characters can be changed to uppercase, while still leaving some in lowercase.

In fact, the Federal Bureau of Investigation’s office in Portland, Oregon advises having “passphrases” instead of passwords. “Instead of using a short, complex password that is hard to remember, consider using a longer passphrase. This involves combining multiple words into a long string of at least 15 characters. The extra length of a passphrase makes it harder to crack while also making it easier for you to remember,” FBI Oregon wrote in an online column.

US-based Identity Theft Resource Center adds that consumers should enable all the security features in their devices (e.g., screen lock/biometric lock) to keep hackers from accessing their digital wallet or payment apps, as well as stealing log-in credentials or money. Consumers should also be on guard against unsolicited emails or text messages that ask the user to send money directly through a digital wallet or payment app; as well as “red flags” such as payments they did not make using their payment apps. — Adrian Paul B. Conoza

On the road to transforming payments

Digital payment solutions are expanding in recent years. But majority of Filipino adults, as of 2019, remain unbanked. Furthermore, cyberthreats that escalated amid the lockdown are also a concern.

The Bangko Sentral ng Pilipinas (BSP) seeks to improve the digitalization of payments in the country as charted in its Digital Payments Transformation Roadmap 2020-2023. The objective is to establish “an efficient, inclusive, safe, and secure digital payments ecosystem that supports the diverse needs and capabilities of individuals and firms, towards achievement of the BSP’s mandates.” From this goal, the central bank envisioned two strategic outcomes.

One is a strengthened consumer preference for digital payments through shifting 50% of the total volume of retail payments to digital, as payment services are also a gateway of Filipinos to enter the formal financial system. This aim involves growing the number of financially included Filipino adults to 70% by onboarding them to the formal financial system through payment or transaction accounts.

The other outcome is to develop more innovative and responsive digital financial services with innovative financial products and services attending to consumer needs; the Philippine Identification System (PhilSys) for Know-Your-Customer (KYC) compliance; and next-generation payment and settlement services.

To accomplish these goals, the central bank noted three critical areas that the country should focus on for a successful road to a cash-lite economy.

The first of these three pillars is digital payment streams that comprise the BSP’s key initiatives to create digital payments use cases that would catalyze wider adoption among consumers and businesses. The second is enhancing digital finance infrastructure to support digital payment expansion and facilitate seamless transactions. Lastly, to ensure the alignment of these payment streams and systems with global best standards and practices, digital governance and standards should be formulated and implemented.

In the road map, the BSP also recognized broader challenges in developing digital payment ecosystem and financial inclusion, such as shifting mind-sets, the digital divide, and the lack of fast and reliable internet connectivity.

BSP Governor Benjamin E. Diokno said in a statement that with the launch of the three-year road map last October, the central bank aims “to hit two birds with one stone. We are securing the digitalization of payments, and increasing the number of Filipinos with access to financial services.”

The road map has seen some progress as some of its priority actions for 2020 to 2021 are pushing through.

One of the BSP’s strategic initiatives under digital payment streams is to expand QR Ph, the National QR Code standard, by implementing person-to-merchant (P2M) payments. Its pilot launch was held in April, and it was fully implemented in October.

Initially, the first use case of QR Ph launched in November 2019 is for digital person-to-person (P2P) transfers. By end-August this year, 23 InstaPay participants offer QR Ph P2P payment services to their clients. QR Ph P2M drew on such successful launch and adoption of QR Ph P2P.

According to the BSP, the implementation of QR Ph P2M would let businesses, including micro, small, and medium enterprises (MSMEs), and merchants experience the benefits of digital payments. Customers, on the other hand, have more convenient means to pay when purchasing from merchants. For payment service providers, they can potentially expand their customer base, strengthen business relationships with their accredited merchants, and enhance their financial products by participating in this facility.

Meanwhile, regarding digital finance infrastructure, the BSP’s key payment infrastructure development initiatives deal with supporting PhilSys to promote financial inclusion and innovate digital financial services; enhancing the Philippine Payment and Settlement System (PhilPaSS) into PhilPaSSplus; and moving towards an open banking ecosystem.

PhilPaSSplus was set to go live by June this year as the enhanced, next-generation version of the PhilPaSS, the country’s real-time gross settlement system. The BSP announced on Aug. 26 that the system is on live run.

The PhilPaSSplus, according to Mr. Diokno in a BusinessWorld report, will improve the safety and efficiency of retail and large-value transactions. Additionally, with the latest technology, the PhilPaSSplus will also significantly develop risk reduction, security levels, business continuity provisions, liquidity management, and data and information generation.

To support the increase of payment digitalization, the BSP’s initiatives under digital governance and standards involve Open Banking and Application Programming Interfaces Standards; Data Governance and Ethical Use of Data Policy; Adoption of the ISO 20022 International Messaging and Communication Standard; and Cybersecurity Policies and Measures, such as the development of Cybersecurity Maturity Model Framework and conduct Cybersecurity Controls Self-Assessment.

The BSP has achieved its target set in 2015 to reach 20% of digital payments volume by 2020. The 2021 edition of the country’s digital payments status report notes the volume of monthly digital payments in the previous year rose to 20.1% and 26.8% in terms of value.

“These figures demonstrate that the Philippines has made tremendous strides toward growing an inclusive digital payment ecosystem,” Mr. Diokno said in the report.

“We are optimistic that digital payments adoption will sustain the upward momentum during the post-pandemic years and would allow us to achieve the 50% target by 2023,” he added. — Chelsey Keith P. Ignacio

Toyota Motor Philippines: Progressing cashless society through integrated e-wallet

Going over the demands in the new normal, an option to provide digital payment solutions for consumers is accelerating across industries to provide a safer and convenient means to pay for essentials.

Toyota Motor Philippines (TMP), for its part, further speeds up its drive towards digitalization by venturing into online payment channels for customers. The undertaking, while a way to adapt to the ‘new normal’ living, also expands the cashless society in the country.

Toyota’s journey towards being cashless with TOYOTA Wallet started in Japan in 2019. Thailand followed, adopting a digital wallet as well a year after. The Philippines then joined in by launching its myTOYOTA Wallet this year.

TMP, together with Toyota Financial Services Philippines (TFSPH), released the myTOYOTA Wallet app to enhance customer experience by a digital wallet that brings together a range of payment options in one app, which is also connected to the whole Toyota ecosystem that now accepts mobile payments.

myTOYOTA Wallet is Toyota customers’ gateway to a wide and growing range of new possibilities

Through the new app, customers in the Philippines can pay for their Toyota transactions in services such as periodic maintenance, vehicle repair, purchasing parts and accessories, and vehicle insurance payments.

myTOYOTA Wallet offers two account types for customers: the Basic account has a P100,000 transaction limit per year; while the Upgraded account allows a P100,000 transaction limit per month or P1.2 million per year.

The application process only needs a few taps. After registering using an e-mail or mobile number, adding personal details, and signing in with username and password, customers can then easily link their selected credit and debits cards.

To activate an upgraded account, customers also need to take a photo of their ID and a selfie for verification. Approval status will be notified after one or two days.

myTOYOTA Wallet allows the user to connect up to three credit and debit cards, as long as the card is supported by Visa or Mastercard. Customers can choose to pay electronically through the myTOYOTA app or scan QR codes with the app at any Toyota dealer nationwide. They can also be assured of the safety of transactions in the app with its features that include point-to-point encryption, one-time password, and mobile PIN authentication. myTOYOTA Wallet is thus made to be flexible, easy, and secure for Toyota customers.

Click to enlarge.

As Toyota’s cashless society expands globally, customers can look forward to more features and expanded services beyond cars. Following the app’s launch, electronic money services will soon be available, TMP told BusinessWorld in an e-mail.

TMP has been enhancing its digitalization over the past year. Aside from presenting online payment options, it also has a mobile app, myTOYOTA, which provides customers with a unified platform to access the entire information and services they need like car buying, after-sales, and maintenance via a single app. It also opened a virtual showroom to let interested buyers explore the interior and exterior of vehicles.

TFSPH, a part of Toyota’s network of sales finance companies under Toyota Financial Services Corp., commits to enhancing its financial services through kaizen or “continuous improvement” activities. The unit creates value for customers through reliable financial products and services that meet their unique needs and expectations.

Toyota Financial Services Philippines Corp. is supervised by the Bangko Sentral ng Pilipinas.

 

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BSP likely to hold rates steady — poll

BW FILE PHOTO

By Luz Wendy T. Noble, Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) is widely expected to keep rates steady on Thursday to continue supporting the Philippine economy’s recovery.

Twenty economists in a BusinessWorld poll held last week unanimously forecast that the Monetary Board would maintain the overnight reverse repurchase rate at a historic low of 2% during its Nov. 18 meeting.

“The BSP may continue to be patient and continue its accommodative monetary policy stance given the current domestic, external and financial developments,” BSP Governor Benjamin E. Diokno told reporters via Viber on Sunday.

Despite the stronger-than-expected gross domestic product (GDP) growth data in the third quarter, analysts think there is still a need to keep an accommodative policy stance because recovery has yet to firm up. 

“I think the BSP will keep policy rates unchanged. The economy is still weak and the recovery has to have strong legs [at least two more quarters of robust growth] to run before the BSP revises its rates,” said Victor A. Abola, an economist at the University of Asia and the Pacific.

ANZ Research Chief Economist for Southeast Asia Sanjay Mathur said it is not yet clear whether the third-quarter growth could be sustained.

Data from the Philippine Statistics Authority showed GDP rose by 7.1% year on year in July to September, a turnaround from the 11.6% decline a year earlier but slower than the 12% annual expansion in the second quarter. A strict lockdown was implemented in Metro Manila for two weeks in August to curb a Delta-driven surge in coronavirus disease 2019 (COVID-19) infections. On a quarter-on-quarter basis, GDP grew by 3.8%.

Economic managers are optimistic that the 4-5% growth target for 2021 is attainable as GDP expanded by 4.9% in the first nine months.

“The GDP prospects appear bright…These latest forecasts suggest that the country’s real output will revert to its pre-pandemic level by the third quarter of 2022, if not sooner,” BSP Governor Benjamin E. Diokno said in a Viber message to reporters on Sunday.

Mr. Diokno may likely be able to confirm whether economic growth is truly on the mend once the base effects from 2020 fade, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said. The economy contracted by a record 9.6% in 2020 amid long and strict lockdowns.

“We expect BSP to consider tightening sometime in the first half of 2022, after a considerable number of positive GDP data points give palpable evidence that the recovery is sustainable and as we inch closer to 2019 levels of GDP,” he said.

Ensuring sustained accommodative policy would help to solidify recovery as lower financing costs spur greater demand for credit, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“This [credit] is in turn expected to help in stimulating more investments and job creation,” Mr. Ricafort said.

Capital formation, which is boosted by lending, rose by 22% in the third quarter, a reversal of the 39.5% contraction a year earlier but slower than the 80.3% rise in April to June.

Bank lending posted a second straight month of growth in September, expanding by 2.7% year on year.

Bank lending started to expand in August after eight straight months of contraction since December, with analysts saying it reflected the lag in monetary policy easing that began last year. The BSP slashed rates by 200 basis points in 2020 to support the pandemic-stricken economy.

While still above target, inflation has eased for two straight months. This strengthens the case for the BSP to maintain its policy settings, analysts said.

“The inflation rate remains elevated so I think the BSP will retain its policy rate at its next meeting,” said Mitzie Irene P. Conchada, an economist from the De La Salle University.

ANZ’s Mr. Mathur said inflation continues to be driven by supply issues but appears to be easing.

The consumer price index rose by 4.6% in October, easing from 4.8% in September as food prices increased slower.

This brought inflation year to date to 4.5%, which is still above the 4.4% forecast by the BSP for 2021 as well as the 2-4% target. Mr. Diokno said inflation could even be at a slower 4.3% this year given recent developments.

“With inflation likely to be within target next year, we continue to expect the BSP to be in no hurry to raise its policy rate before the fourth quarter of 2022, and ensure ample liquidity support for the nascent economic recovery,” said Nalin Chutchotitham, Citigroup, Inc. economist for the Philippines.

Mr. Diokno earlier said prematurely hiking interest rates could pose more harm to economic recovery than increasing it too late.

The Monetary Board kept interest rates unchanged at its September review, even as it raised its inflation expectation due to low supply. Officials said monetary policy support was needed to boost domestic demand and market confidence.

After Thursday’s meeting, the BSP will have its last policy review this year on Dec. 16.

GDP on track to hit pre-pandemic level by Q3 2022

PHILIPPINE STAR/ MICHAEL VARCAS

THE PHILIPPINE ECONOMY is expected to return to its pre-pandemic level by the third quarter of 2022, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said, citing the decline in coronavirus infections and the improving vaccination rate.

Mr. Diokno told reporters in a Viber message gross domestic product (GDP) growth prospects “appear bright,” after GDP expanded by 7.1% in the third quarter.

“Based on recent developments including the ramped up vaccine rollout and the ebbing COVID-19 (coronavirus disease 2019) cases, the Development Budget Coordination Committee GDP growth targets of 7-9% in 2022 and 6-7% in 2023 look doable,” he said.

“These latest forecasts suggest that the country’s real output will revert to its pre-pandemic level by the third quarter of 2022, if not sooner,” he added.

This is more optimistic than Mr. Diokno’s statement in September when he said the economy could only return to its pre-pandemic level by the fourth quarter of 2022 or the first quarter of 2023.

More than a third (34.14%) or 36.907 million of the Filipinos have been fully vaccinated against COVID-19.

The number of new COVID-19 infections have also declined in recent weeks, while mobility curbs have been relaxed in Metro Manila. The Health department reported 1,926 cases on Sunday, bringing the active cases to 28,102.

Mr. Diokno said the central bank could “continue to be patient and continue its accommodative monetary policy stance.”

He cited October inflation which eased as food supply conditions improved.

The consumer price index stood at 4.6% in October, slower than 4.8% in September as food prices increased slower. This brought inflation year to date to 4.5%, which is still above the 4.4% forecast by the BSP for 2021 as well as the 2-4% target.

“With sufficient slack in the labor market and the expected higher participation rate as workers re-enter the workforce, there is little likelihood of a wage hike as the vaccine rollout quickens and consumer confidence rises while economic activity expands,” he said.

Mr. Diokno said this contrasts with the inflationary pressures in the United States, European Union and United Kingdom, which are due to supply chain bottlenecks and higher labor costs.

“The threat of the peso depreciation is fading as the peso is expected to appreciate, with the prospect of stronger overseas Filipino remittance inflows in the last few weeks of the year in time for the Christmas holidays,” he said.

The peso ended Friday trading at P49.85 a dollar, gaining 31.5 centavos from its P50.165 close on Thursday, based on data from the Bankers Association of the Philippines. The currency also appreciated by 48 centavos compared with its close of P50.33 per dollar a week earlier.

The BSP chief also ruled out asset price bubbles, which could potentially threaten financial stability.

“There appears to be no pressure on rising real estate prices. The increase in real property prices in the National Capital Region (NCR) is either flat or slightly down, though there is a slight increase in prices in few places outside NCR,” he said.

In the second quarter, the BSP’s Residential Real Estate Price Index declined by an annual 9.4%, worse  than the 4.2% decline in the first quarter. This was mainly caused by the decline in condominium units and single houses.

The Monetary Board will have its policy setting meeting on Thursday, Nov. 18. All 20 analysts polled by BusinessWorld expect it to keep interest rates unchanged. — Luz Wendy T. Noble

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