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Payment System in the
Philippines: Recent
Developments
Mario B. Lamberte
Director of Research
Asian Development Bank Institute
10 February 2009
Outline of the Paper
•
•
•
•
Flow of funds
Payment system in the Philippines
Innovations in payment system and SMEs
Global financial crisis, capital flows and
payment system
Table 1. Indicators of Funds Flow
1.M2/GDP (%)
46.7
2. Market cap – equity (% of GDP)
71.62
3. Outstanding bonds (% of GDP)
33.73
4. Total Trade (% of GDP)
85.38
5. Capital Flows (% of GDP)
18.4
6. Remittances, billion US$
14.4
% of GDP
24.93
Table 2. Number of Financial Institutions, End-September 2008
End-September 2008
TYPE OF FINANCIAL INSTITUTIONS (FIs)
TOTAL
HEAD
OFFICE
OTHER
OFFICES
21,952
7,279
14,673
7,811
835
6,976
4,330
3,847
3,417
415
15
38
17
11
3
3
4,292
3,830
3,406
412
12
483
397
70
16
21
7
3
11
462
390
67
5
1/
1,331
80
1,251
C. Rural and Cooperative Banks
1/
Rural Banks
Cooperative Banks
2,150
2,031
119
717
672
45
1,433
1,359
74
14,134
6,437
7,697
37
14
23
14,097
144
13,864
89
7
6,423
77
6,274
72
7
7,674
67
7,590
17
I.
BANKS
A. Universal and Commercial Banks
Universal Banks
Private Domestic Banks
Government Banks
Branches of Foreign Banks
Commercial Banks
Private Domestic Banks
Subsidiaries of Foreign Banks
Branches of Foreign Banks
B. Thrift Banks
II.
NON-BANK FINANCIAL INSTITUTIONS
A.
B.
III.
With Quasi-Banking Functions
Without Quasi-Banking Functions
2/
NSSLAs
Pawnshops
Others
OFFSHORE BANKING UNITS
1/
Including Microfinance-Oriented Banks
Refers to non-stock savings and loan associations
Source : Supervisory Data Center, Supervision and Examination Sector
2/
Updated as of 10 November 2008
Payment Methods
Cash
(1)
Payment
Cards
Internet
Banking
Credit card
Debit card
Stored value
card
Paper-based
Checks (2)
Electronic
Payment (3)
Mobile
Phone
Banking
Philippine
Domestic
Dollar
Transfer
(PDDT)
Electronic
Peso
Clearing
System
(EPCS)
Philippine
Payments
and
Settlement
(PhilPass)
Focus on two major developments:
1. Large-Value Transfer System
- overcoming systemic risk
2. Small-Value Transfer System
- overcoming SMEs’ lack of access
Source: Bangko Sentral ng Pilipinas
Unconventional Methods of Transferring Funds:
Non-Banking Entities
1. Pawnshops - remittance
2. Cooperatives – access to ATM services
3. G-Cash – electronic wallet; banking product
Leveraging high CMT density for mobile banking ….
Figure 2. Telephone Subscribers, in millions
Source: Globe Commerce
CASE: Small rural bank
Mobile Phone Banking Transactions, Green Bank
60
60
50
36.6
40
30
20
3.8
10
0
2006
Year
2007
No. of Transactions (in Thousand)
Source: Greenbank.com, Philippines
2008
Value of Transaction (in Million Pesos)
On the global financial crisis and capital flows….
Figure 3a. Outflows, Inflows, and Netflows of Direct Inv estment, Philippines
2005Q1-2008Q3, in million US dollars
2000
FDI holding…
1000
0
2005:1
2005:2
2005:3
2005:4
2006:1
2006:2
2006:3
2006:4
2007:1
2007:2
2007:3
2007:4
2008:1
2008:2
2008:3
-1000
-2000
-3000
-4000
Outflows
Inflows
Net
Figure 3b. Outflows, Inflows, and Netflows of Portfolio Inv estment, Philippines¹
2005Q1-2008Q3, in million US dollars
5000
4000
3000
2000
1000
0
2005:1
2005:2
2005:3
2005:4
2006:1
2006:2
2006:3
2006:4
2007:1
2007:2
-1000
-2000
-3000
-4000
Outflows
Inflows
Net
2007:3
2007:4
2008:1
2008:2
2008:3
Foreign investors
pulling out; but
residents
repatriating
capital..
Figure 4. Stock Price Index and Peso/Dollar rate, Philippines (end of Period)
2000M1-2009M1
Stock market
price falls and
currency
depreciation..
200
180
160
140
120
100
80
60
40
20
Stock Price Index
NER
Figure 5. Gross International Reserves, Philippines,
in million US dollars, (end of quarter)
Reserves
holding….
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Mar
Jun
Sep
2 007
Dec
2009M1
2008M9
2008M5
2008M1
2007M9
2007M5
2007M1
2006M9
2006M5
2006M1
2005M9
2005M5
2005M1
2004M9
2004M5
2004M1
2003M9
2003M5
2003M1
2002M9
2002M5
2002M1
2001M9
2001M5
2001M1
2000M9
2000M5
2000M1
0
Mar
Jun
Sep
2008
Dec
Transactions had intensified……
Figure 7. Interbank Transactions at PhilPass
Ja
n
20
07
M
ar
20
07
M
ay
20
07
Ju
ly
20
07
Se
p
20
07
No
v
20
07
Ja
n
20
08
M
ar
20
08
M
ay
20
08
Ju
ly
20
08
Se
p
20
08
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Volume
Amount (PhP, B)
Some Issues
For large-value payment system: PhilPaSS/RTGS
¾ provision of intra-day credit liquidity
¾limits to intra-day credit liquidity
¾collateralized or uncollateralized intra-day credit liquidity
¾basis for pricing such facility.
For small-value payment system:
¾ participation of non-bank entities – regulatory regime
¾ consumer protection
¾flexibility in times of crisis