With annual remittances at nearly $30 billion and growing, the commercial banking sector in the Philippines and the country’s central bank, Bangko Sentral ng Pilipinas (BSP), are exploring ways of improving payments and money transfers. One area of interest is the distributed ledger technology (DLT), which is more popularly known as blockchain and underpins cryptocurrencies such as Bitcoin.
Speaking at the annual convention of the Philippine Correspondent Bank Officers (APCB), BSP governor Nestor Espenilla Jr. said the central bank was looking for ways to utilize DLT for wire transfers and other traditional banking services.
Espenilla said in his keynote address:
“One recent development with significant impact [on] correspondent banking is the rise of blockchain, or distributed ledger technology (DLT). The 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.”
Correspondent banks act on behalf of other financial institutions, most often providing services such as facilitating wire transfers, conducting business transactions, accepting deposits, and gathering documents.
“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,” Espenilla added.
The BSP chief made his comments in the wake of a survey showing that nearly 60 million adult Filipinos remain unbanked, which presents a considerable challenge but also opportunities for digital financial inclusion.
The BSP 2017 Financial Inclusion Survey (FIS) said that only 15.8 million, or around one-fourth of the total adult population, own a bank account.
The central bank commented on the report:
"While formal account penetration remains low and growth is modest, there are opportunities for greater financial inclusion enabled by digital technology. At present, accounts are still underutilized for payment and remittance transactions…Digitizing these payment and remittance transactions is a crucial step towards digital financial inclusion."
On Monday, the BSP reported that personal remittances from Filipinos working abroad reached $2.7 billion in May, or 6.1% higher than the level recorded a year ago. On a cumulative basis, personal remittances for the first five months of 2018 grew by 4.4% year-on-year to reach $13.2 billion.
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