By Karis Kasarinlan Paolo D. Mendoza, Researcher
BY THE END of 2023, after the initial surge of digital payment options during the COVID-19 pandemic, the Philippines achieved its goal of digitizing half of all retail payments in the country.
This target was set under the central bank’s Digital Payments Transformation Roadmap — an initiative to build more innovative and responsive digital financial services and to strengthen consumer preference for digital payments.
Last year, monthly digital payments in the Philippines reached 2.62 billion, accounting for 52.8% of all monthly transactions.
Meanwhile, the volume of PESONet transactions reached 82.93 million in the first 10 months of 2024, 9.5% higher than the 75.7 million recorded in the same period last year.
InstaPay transactions likewise jumped 68.3% in the January-to-October period to 1.11 billion from 657.76 million in the same period a year ago, data from the BSP showed.
The BSP is targeting a 60-70% share of digital payments to total retail payments by 2028.
In line with its goals, the BSP continues to build trust and confidence in the use of digital payments with its issuance of Circular No. 1195 or the Consumer Redress Mechanism Standards for Account-to-Account Electronic Fund Transfers (EFTs) under the National Retail Payment System (NRPS) framework — a regulatory framework that aims to provide policy direction in carrying out retail payment activities to create a safe, efficient, and reliable retail payment system.
“NRPS promotes, among others, interoperability — the state when end-users or consumers are able to transfer funds from one account to another account in any participating BSP supervised financial institution (bank or electronic money issuer). By enabling interoperability, sustained adoption of electronic payments is plausible as electronic transactions are made more convenient,” the BSP said.
“Lack of trust is considered to be a pain point in the use of digital payments,” the central bank said in an e-mail interview.
This was the reason why the BSP issued the circular, which sets industry-wide expectations on consumer remedy for online transactions from payment service providers.
“[The circular] supports digital transformation as it builds consumer trust and confidence in the use of digital payments,” the BSP said.
The Circular is a step to setting standards on handling customer complaints, Emmie C. Reyes, BancNet chief executive officer, said in a separate e-mail interview.
“These standards would ensure customers can trust their financial institutions for their daily financial needs,” she added.
With this issuance, financial institutions will be required to give notifications regarding the status of EFTs to both the sender and the receiver.
For unsuccessful instant retail payments, funds must be returned to the senders account within one hour. For batch clearing such as PESONet, the amount debited must be returned within two hours.
“The Circular also requires PSPs (payment service providers) and CSOs (clearing switch operators) to define their roles and expectations during disruptions that affect the efficient and timely delivery of electronic fund transfer,” the BSP said.
“Any noncompliance or violation of the requirements under the Circular may result in the imposition of corresponding supervisory enforcement actions.”
The Circular provides a transition period for automated clearing houses (ACH) participants and CSOs to prepare and ensure full compliance with all requirements by January 1, 2025.
“Financial institutions are in various stages of ensuring their operations comply with [the policy]. Most institutions are pursuing system development, while others are improving processes within their organization. The industry is exerting its best efforts to ensure full compliance with the BSP’s deadline,” Ms. Reyes said.
“The discussion between the BSP and the PSPs about this Circular started as early as the second quarter of 2022, and that continues even up to this time. Based on our discussions, the payments industry is on track to meet the deadline,” the BSP said.
COMMON COMPLAINTSAccording to the BSP, a significant portion of complaints it receives concern various types of online fund transfers, which it attributes to the increasing number of EFT transactions. Complaints listed by the BSP include delays in receiving funds, lengthy processing of refunds for unsuccessful transactions, and unannounced service disruptions.
“This information and feedback that we saw from the complaints served as considerations in our crafting of Circular No. 1195,” the BSP noted.
Under current industry rules, receiving financial institutions have a turnaround time of two days for disposition after a transaction, it said.
However, it said that some PSPs take longer to complete transactions.
Maricar Bautista, a BDO and GCash user, shared her worries when she encountered issues with her fund transfer back in February.
“I sent money from my BDO to GCash which usually transfers in real time. However, this time my money did not reflect in my GCash balance. I asked around and was told by a friend to wait for the money to either return to BDO or reflect in GCash,” she said in a call interview.
“I was supposed to use the money to pay for our insurance and I was worried because the money had been deducted from my BDO account. I decided to wait one or two days before issuing a complaint,” she explained.
She added that she was not made aware of any service disruptions before she made her transfer, but soon after read online that others were experiencing similar issues.
“I think the new policy will be helpful if implemented correctly, because most of the time banks are not able to immediately help with issues regarding fund transfers. It will be great for bank users, especially when our hard-earned money is involved,” she said.
Meanwhile, Danie Leonore, a BPI user, said she also had problems with an EFT recently.
“I transferred money from my BPI account to GCash on Nov. 24, which usually reflects immediately on both my accounts. This time, however, the transaction was recorded but the money did not enter my GCash account,” she said in a Facebook Messenger chat.
“It has been a week since the transaction, but the issue has not yet been resolved. It makes me anxious because this has never happened to my BPI-to-GCash transfers before. Floating transactions is also the reason why I stopped using my previous bank and moved to BPI,” she said.
She explained that she tried to get in contact with BPI first, then GCash.
“BPI gave me an acknowledgement email and told me to wait two business days. After two days the money still did not transfer so I got in contact with GCash and received a ticket. At first, they were updating me through the app which helped with my anxiety regarding my missing money. However, one week after the failed transaction, GCash told me to contact BPI to resolve the issue,” she concluded.
She noted that she was not made aware of any scheduled or unscheduled service disruptions when she made her transaction.
Ms. Leonore said she thinks the Circular will be helpful especially since banks usually ask to wait two to four business days when handling complaints.
“It will be helpful in resolving problems like mine. There will be less of a hassle because issues will be resolved within the day instead of the current two to four days which is a long time for some, people,” she said.
“[Given that the policy will bring] a better user experience with their financial institutions, there is an expectation that financial institutions can achieve higher customer satisfaction rates in terms of addressing complaints on electronic fund transfers,” Ms. Reyes said.
“Once implemented, we hope to see a decrease in the number of complaints for EFT transactions. We hope that this to higher and more sustained use of digital payments as the public will have more trust and confidence in their reliability,” the BSP said.
BIRTH PAINSThough there are expectations of improved customer service, the policy still carries risks.
“The BSP had a lengthy discussion with the PSPs during the formulation of this Circular. One concern raised by both banks and EMIs, is the amount of additional resources needed for the implementation of this Circular. The policy may pose some challenges to new entrants, particularly those with smaller scale of operations,” the BSP said.
However, the BSP said that “birthing pains” are a part of any new service, and it is confident that these challenges and concerns can be addressed with constant collaboration with the payment industry.
“Ultimately, the BSP and the industry have a common objective of developing and fortifying trust and confidence in the use of digital payment services and of providing appropriate support for concerns that arise in relation to their use of these services,” it said.
On the other hand, Ms. Reyes cited financial risk and noncompliance as possible concerns for financial institutions.
“Financial institutions will face regulatory scrutiny from the BSP if they do not follow prescribed protocols under the circular when it comes to handling floating transfers,” she said.
She added that financial institutions may face various risks, such as scenarios involving financial institution credits money back to the sender’s account, while the receiving financial institution has credited the money to the receiver’s account.
To mitigate these financial risks, she em phasized that it is important for financial institutions to promptly address any communication-related issues.
The BSP said in its report that inevitably, innovation comes with risk, which is why growth in payment streams and the creation of new systems must be supported by secure digital governance standards in line with global practices.
“An appropriate regulatory framework should be in place to ensure that the provision of digital products and services is covered by an adequate governance process, meets minimum technical expectations, and safeguards the integrity, security and privacy of customer data,” it said.
