THE BANGKO SENTRAL ng Pilipinas (BSP) and commercial banks are exploring ways to use blockchain technology to fast-track payment and remittance services.
BSP Governor Nestor A. Espenilla, Jr. said the central bank has been studying how to tap the platform used by bitcoin and other digital currencies — called the distributed ledger technology (DLT) — for traditional banking and wire transfers.
“[T]he BSP is working closely with market innovators and industry players to explore tie-ups of correspondent banks with DLT providers. We believe that collaboration and strengthening partnerships with other fintech players is a way to boost digital capabilities of correspondent banks,” Mr. Espenilla told the Association of Philippine Correspondent Bank Officers during their annual convention in Palawan.
“To grow markets in the midst of competition, new customer solutions through efficient operations should be delivered.”
Correspondent banks provide links between financial firms in processing remittance and other fund transfers.
“Technology-based solution providers suggest that blockchain or DLT could be harnessed to alleviate some correspondent banking issues. This can be achieved by enabling better risk management, reducing costs, and providing an alternative payment platform, especially in terms of transferring small-value payments,” the central bank chief said.
The BSP chief noted that monetary authorities have also been looking into central bank-issued digital currencies and their possible impact on bank credit and on the entire financial system.
Although banks are cool to using bitcoin and virtual currencies, a number of players have since adopted the blockchain technology to make internal processes more efficient.
For now, Mr. Espenilla said the BSP has approved a pilot project that seeks to create a real-time remittance corridor that will not use a central operator, bypassing the need for correspondent banks.
Blockchain consists of digital ledgers of transactions maintained in an ever-growing peer-to-peer network that itself safeguards the integrity of the records.
The Bankers Association of the Philippines is also creating its own program that will use digital IDs using blockchain, Mr. Espenilla added.
The central bank has been particularly upbeat about migrating to digital transactions, which monetary authorities regard as the most efficient way to get more Filipinos aboard formal financial channels.
More than half of Filipinos own smartphones and have Internet access.
The BSP has said that digitizing payment and remittance transactions would be crucial to achieving financial inclusion, as it would improve access while also trimming transaction costs. — Melissa Luz T. Lopez