Published on November 17, 2023, 12:19 am

Bsp Aims To Reduce Remittance Fees And Enhance Financial Services With Nexus Project And Open Finance Framework

The Bangko Sentral ng Pilipinas (BSP) is taking steps to reduce transaction fees for remittances through its collaboration with other central banks as part of the Bank for International Settlements’ (BIS) Nexus Project. BSP Governor Eli M. Remolona, Jr. announced that the central bank is working with its counterparts in the Association of Southeast Asian Nations (ASEAN) to develop the Nexus payment system.

The goal of this initiative is to create a system that is interoperable across banks worldwide, enabling global remittances at reduced costs. Currently, sending money to the Philippines through retail payments incurs fees of around 5%. The BSP aims to bring this figure down to 3% initially and eventually further reduce it to just 1%.

Lowering transaction costs for remittances aligns with the United Nations’ sustainable development goals, which aim to minimize transaction fees below 3% and eliminate expensive remittance corridors above 5% by 2030. As per a report from the World Bank in June, the average cost of sending remittances globally accounted for 6.2% of the amount transferred in Q2, with digital services comprising 30% of all remittance prices during that period.

In September, cash remittances from overseas Filipino workers (OFWs) increased by 2.6%, reaching $2.91 billion compared to $2.84 billion in the same month last year, according to recent data from the BSP. This marked a two-month high following July’s $2.99 billion figure.

For the first nine months of this year, OFW remittances rose by 2.8%, amounting to $24.49 billion, up from $23.83 billion during the same period in 2020.

The Nexus project is a prototype developed by BIS Innovation Hub Singapore Centre in collaboration with Italy, Malaysia, and Singapore’s central banks. It aims to connect payment system operators across various economies, facilitating seamless cross-border transactions.

Additionally, Governor Remolona revealed that the BSP is working on an open finance framework to enhance the Philippine banking system. This framework would provide lenders with increased access to consumer data, enabling them to explore additional financial services and analytical platforms.

The PH Open Finance Pilot, an initiative involving volunteer financial institutions, aims to leverage application programming interface (API) technologies in enhancing financial products and services. Streamlining open finance is expected to improve processes like know your customer verification and credit underwriting, thereby promoting financial inclusion in the country.

Regarding digital banks, Governor Remolona mentioned that the BSP might grant the six existing digital banks operating in the Philippines a few more years to demonstrate their capabilities before opening up opportunities for new players. He acknowledged that these digital banks have performed well in terms of deposits but face challenges when it comes to providing online loans.

To ensure proper monitoring, foster competition, and strengthen its regulatory capabilities over digital lenders, the BSP capped the number of digital banking licenses at six in 2021.

The current digital banks providing services in the Philippines are Tonik Digital Bank Inc., GOtyme (a collaboration between Gokongwei Group and Singapore-based Tyme), Maya Bank of Voyager Innovations Inc., Overseas Filipino Bank (a subsidiary of Land Bank of the Philippines), UNObank (operated by DigibankASIA Pte Ltd.), and UnionDigital (affiliated with Union Bank of the Philippines Inc.).

The BSP has set ambitious goals for this year: digitizing 50% of retail transactions and increasing the proportion of Filipino adults with bank accounts to 70%. These initiatives aim to promote financial inclusion and bring modern banking solutions within reach of a larger population.


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