Challenges in going digital while future-proofing banknotes

PHILIPPINES - Report 28 Oct 2024 by Diwa Guinigundo and Wilhelmina Manalac

Working for greater digitalization, the BSP initiated the formulation and implementation of key policies and regulations, including the creation of the National Payment Retail System as well as the establishment of automated clearing houses (ACH), namely, InstaPay and PESONET, electronic fund transfer facilities. The latest BSP data shows that payments transactions through InstaPay and PESONET rose to P12.4 trillion from January to September 2024 from P9.2 trillion during the same period a year ago, representing an increase of 33.9 percent. In terms of volume, the combined transactions completed via InstaPay and PESONET increased by 64.1 percent to 1.1 billion for the first 9 months of 2024 from 638.9 million last year.

The most recent report of the BSP showed that the share of digital payments by volume in 2023 rose exponentially, to 52.8 percent from just 10.0 percent in 2018, and 42.1 percent in 2022. Of a total of 4,966.0 million payments transactions in 2023, 2,619.8 million were digital. Data thus showed that the BSP has surpassed its target of digitalizing 50 percent of the volume of retail payments by end-2023.

If some quarters believe that these trends could dislodge the use of banknotes in the Philippines, the recent memorandum of understanding signed between the BSP and the German federal technology company Bundesdruck GmbH last October 19 should indicate that this may not be the case just yet. The BSP aims to seek the German company's support in digitalization as much as in future-proofing Philippine banknotes. The transition to a higher level of digitalization may still be a remote target considering the challenges of weak connectivity and infrastructure backbone.

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