Revolutionizing the payments and settlements system The BSP’s journey toward financial digitalization

ter, this function was then institutionalized through the enactment of the amended BSP charter (Republic Act No. 11211). The law explicitly states that “the Bangko Sentral shall oversee the payment and settlement systems in the Philippines, including critical financial market infrastructures, in order to promote sound and prudent practices consistent with the maintenance of financial stability.” ago before the COVID-19 pandemic hit. Making payments efficient, safe, and inclusive

The digitalization trend comes amid the BSP’s efforts to pursue a payments and settlements system that is efficient, safe, and inclusive.

In 2022, the share of monthly digital payments to total monthly retail payments volume in the Philippines reached 42.1 percent, up from 30.3 percent in 2021. Moreover, as of 2021, about 56.0 percent of Filipino adults owned a formal financial account compared with 29.0 percent in 2019.

Besides keeping prices stable, supervising banks, and maintaining the stability of the entire financial system, another crucial role of the BSP is overseeing the country’s payments and settlements system.

Broadly, this mandate of the BSP is centered on ensuring that payments and fund transfers of individuals, businesses, and other entities are completed on time and without issues. This requires monitoring the channels of banks, e-wallets, and clearinghouses through which financial transactions are made.

A robust payments and settlements system is essential for the effective implementation of monetary policy, efficient financial markets, and economic growth.

Payments and settlements system oversight: then and now

The enactment of the New Central Bank Act in 1993—which established the BSP to replace the old Central Bank of the Philippines—paved the way for a more sophisticated payments and settlements system. Since then, the BSP had established facilities for safe and fast electronic interbank payments and settlements for large-value, time-critical transactions.

In 2002, the BSP, through its Payments and Settlements Office, operationalized the Philippine Payment and Settlement System (PhilPaSS). PhilPaSS is a real-time gross settlement system for the processing and settlement of high-value payment transactions of commercial and rural banks. In the succeeding years, other institutions, such as investment houses, thrift banks, and financing companies, joined the roster of commercial and rural banks that enjoy the benefits of interbank and interdealer transactions.

Amid innovations in the financial landscape, the BSP launched the National Retail Payment System (NRPS) in 2015, which accelerated digitalization in the country’s cashheavy retail payment system. The Philippine Payments Management Inc. (PPMI), which is recognized as the country’s payment system management body composed of industry players, was also established in 2017. PPMI supports the BSP in putting forward innovations toward a cash-lite retail payments system.

While the BSP has supervised the country’s payments and settlements system for years, additional regulatory powers were given to the BSP with the enactment of the National Payments and Systems Act (Republic Act No. 11127) in 2018. The act mandated the BSP to oversee payment systems in the country and exercise supervisory powers for the purpose of ensuring the stability and effectiveness of the monetary and financial system. A year af-