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As the Central Bank of the Philippines (BSP) sets out plans to launch three new e-payment streams, Congress has announced it will adopt a new law to ensure consumers are protected from increased digital payments adoption.
On the back of recent news that the Philippines plans to mandate that all public agencies offer digital payments options, the country’s central bank has announced that it will launch bill payment, request to pay and direct debit facilities through its partnership with Philippines Payments Management Inc (PPMI).
PPMI is an industry-led self-governing body that is accredited and overseen by the BSP as a payment system management body, in accordance with the 2018 National Payment Systems Act.
In a press statement, the BSP said that its new Bills Pay service aims to improve existing bill payment mechanisms for retail customers, which it described as “fragmented”.
Specifically, Bills Pay aims to offer a seamless channel for customers to pay water, electricity and telephone bills, even when the accounts of the customer and biller are with different banks or financial institutions.
In many markets around the world, bill payments are typically only available where the transaction is “on us” — for example, where both the biller and the customer use the same bank.
Request to pay is a payment overlay service that provides secure messaging between a payee and a payer, enabling the payee to request payment rather than simply sending an invoice.
Each payment request is automatically linked to a dialogue chain that allows the payer to either approve the request, and therefore authorise the payment to be made from their account, or decline the request, using the dialogue chain to explain why.
Similarly, the BSP’s new Direct Debit feature will allow customers to better manage recurring payments such as subscriptions, bills, loan repayments and insurance, by authorising billers to pull funds directly from a payor’s account.
The three new channels aim to put into action the steps outlined in BSP’s Digital Payments Transformation Roadmap (DPTR) 2020-2023.
Among other targets outlined in the DPTR, the central bank aims to convert 50 percent of retail payments volume to digital channels by 2023. It also aims to onboard 70 percent of Filipino adults into the formal financial system by 2023.
To meet these targets, the BSP has said that PPMI will act as a key partner in building out the country's digital payments infrastructure.
Consumer protections in focus
In related news, on May 6, Philippine President Rodrigo Duterte signed into law a new financial consumer protection act designed to complement the growing importance of digital payments.
Formally known as the Financial Products and Services Consumer Protection Act (FCPA), the act empowers financial regulators to take action against financial service providers who exploit or disadvantage consumers.
The FCPA covers all financial products and services offered by any financial service provider, including those accessed and/or delivered through digital channels.
In its opening section, it outlines five rights of Philippine financial consumers that will be protected by law, namely:
- The right to equitable and fair treatment.
- The right to disclosure and transparency of financial products and services.
- The right to protection of consumer assets against fraud and misuse.
- The right to data privacy and protection.
- The right to timely handling and redress of complaints.
The FCPA gives greater powers to regulators to penalise supervised financial service providers for non-compliance.
Such penalties include restricting the ability of service providers to collect “excessive or unreasonable” interests, fees or charges, including those described in the 2016 Philippine Credit Card Industry Regulation Law.
Regulators can also suspend or disqualify directors, trustees or employees of financial service providers; they can impose cease and desist orders; and they can suspend particular operations, services or products.
The act also outlines criminal and administrative sanctions that can be applied by the Securities and Exchange Commission (SEC) in case of non-compliance.
For investment fraud specifically, administrative fines of between 50,000 and 10m pesos ($950 and $191,000) can be applied for each instance of fraud, plus 10,000 pesos ($191) for each additional day the fraud continues.
For other offences, criminal penalties range from one to five years’ imprisonment to fines of between 50,000 and 2m pesos ($950 and $38,000).
Benjamin Diokno, governor of the BSP, said the Philippines central bank welcomes the passage of the act.
“We have long pushed for the enactment of the FCPA to provide our financial consumers with an armour of protection in the face of increasingly digital financial transactions,” he said.
“The FCPA expands the powers of financial regulators, like BSP, to include adjudication, enforcement, and providing more immediate avenues for redress.
“Beyond addressing gaps in the delivery of financial services, it will strengthen trust and confidence in the financial system.”
Senator Grace Poe, co-author of the act and chair of the Senate Committee on Banks, Financial Institutions and Currencies, also said the new law puts consumer welfare at the forefront of the Philippines' push towards financial modernisation.
“With the enactment of the FCPA, financial transactions, whether small or large, will be given due attention,” she said. “The money earned by our countrymen should not go to waste.”
