• Grow Your Co-op Members’ Business

    Leni San Roque, Chief Executive of the Association of Asian Confederation of Credit Unions (ACCU), tells participants at the recent Co-op Leaders’ Congress in Iloilo City how and why co-ops should upgrade and make an impact in the communities, in Read More
  • Use Tech or Be Left Out

    We must know what is going on outside our co-ops. While we are optimistic about the digitalization of the economy, the fast pace of technological advancement must still undergo government regulation.  Mertz Tangonan shows us a bird’s eye view of Read More
  • COOP-NATCCO Wins One Seat In Congress

    COOP-NATCCO Partylist has announced that it has won one seat in Congress in the May 13 elections.   In a very impressive display of solidarity, cooperative members, leaders, staff, management and stakeholders voted COOP-NATCCO Partylist (CNPL) in the May 2019 Read More
  • Great Potential for Co-ops in e-Payments

    Jing Gusto, consultant of World Council of Credit Unions, presented before the NATCCO Coop Leaders’ Congress in Iloilo City last April the results of a study that shows the readiness of co-ops and their members for e-payments.     I think Read More
  • Help your Members be Entrepreneurs thru e-commerce

    Do your co-op members have products that need marketing?  Your co-op could be the best aggregator.  Online shopping platform Lazada's Petrus Carbonel shows how your co-op can facilitate entrepreneurship among your members.   In the digital economy, co-ops will have Read More
  • Positioning Co-ops in a Digital Economy

    Trade & Industry Undersecretary  for Competitiveness & Innovation Rafaelita Aldaba shared with the NATCCO Leaders’ Congress that it is important for co-ops  to understand how you can position cooperatives in the new digital economy, take advantage of the opportunities and Read More
  • Co-ops Must Invest in the Youth

      15-year-old co-op leader, Alessandra Daquila or Barbaza Multi-Purpose Cooperative in Antique Province spoke before 800 delegates on the opening day of the 17th Co-op Leaders Congress in Iloilo City, and gave them her mind on what co-ops should do Read More
  • Co-ops ready for Digital Economy

    ILOILO CITY – Co-ops must, can, and will definitely go Digital!   More than 700 leaders from 189 cooperatives converged last April 26-28 at the Grand Xing Imperial Hotel for the 17TH Co-op Leaders’ Congress and 42nd General Assembly.  They Read More
  • Power Speakers to Inspire and Impart at Leaders’ Congress

    A power list of speakers await delegates to the 17th NATCCO Co-op Leaders’ Congress in Iloilo City on April 26-28.  Their topics are in line with the theme for the event: “4.0 Positioning Cooperatives in a Digital Economy.”  The topics Read More
  • Supreme Court Ups Small Claims from 300k to 400k Starting April

    The Supreme Court increased the limit of small claims cases filed before the Metropolitan Trial Courts from P300,000.00 to P400,000.00, beginning  April 1, 2019.     Upon the recommendation of the Office of the Court Administrator to Associate Justice Diosdado M. Read More
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Use Tech or Be Left Out

We must know what is going on outside our co-ops. While we are optimistic about the digitalization of the economy, the fast pace of technological advancement must still undergo government regulation.  Mertz Tangonan shows us a bird’s eye view of the digital regulatory landscape. 
 
It’s emerging, the National Retail Payment System Act (NRPSSA).  It is important for you to know the power of digital payments and also understanding the regulatory framework. 
 
I hope in the end, it will be very clear to you what is in electronic payments is for all of us.
 
USAID E-Peso is a 5-year USAID-funded project that aims to accelerate financial inclusion and economic development  from cash and cheques to electronic payments, from manual payments to electronic payments.  The purposes are for 1) broad-based economic growth, and 2) Financial Inclusion.
 
E-peso is part of the partnership for growth and a bilateral agreement between the Philippine and American governments.
 
Our primary   implementing partners in the government side are the Bangko Sentral ng Pilipinas (BSP), Dept. of Budget and Management, DILG, Dept. of Finance, Bureau of Internal Revenue, and others.
 
Why is electronic payments important? Because it promotes financial inclusion – the same objectives of cooperatives.
 
How does it do that?  Studies show that digital payments or technology can reduce the cost of financial services by 80 to 90 percent. So when the cost of delivery of financial services goes down, it means you can expand your reach or coverage.
 
Digital financial services includes payments, savings, credit, investments, and insurance.
 
E-payments boost economic growth.  According to two studies in 55 emerging economies, e-payments boost Gross Domestic Product by up to 6 percent.   An Asian Development Bank study showed e-payments in the Philippines transitioning the economy to digital payments could increase GDP by 2 to 3 percent.
 
And of course, it improves the quality of life.  In a 2016 World Bank study, e-payments directly contribute to meeting ten Sustainable Development Goals (SDGs) like reducing poverty, reducing inequality and hunger, access to health care, access to clean water.  
 
The problem is, we have low e-payments usage.  In a 2017 WB study, in Asia we are in the bottom portion.  Only 14% of our adult population uses e-payments.
 
In contrast, Vietnam which had been at war for 20 years is ahead of us.
Why?  
 
First is the low number of formal accounts of Filipinos.  To engage in e-payments, one needs to have an account in a formal or registered financial institution.
 
The BSP says only 23% of Filipino adults owned a formal account in 2017.  Another problem is limited availability of interbank electronic fund transfers in electronic channels, specifically the internet. 
 
There are very few banks and mobile money operators compared to the population.  That’s why I am happy that NATCCO launched the Kaya Payment Platform.  You are now at par with the big banks in terms of providing these essential services to your members. 
 
Another challenge is that there is limited acceptance of mobile payments by merchants.  There are inefficiencies in the market and transaction costs are still high.  Payment providers still charge 2 to 3 percent.  
 
So there is a natural reluctance or resistance to use e-payments.
 
Second then there is lack of awareness.  On the supply side, we see that the rules of the game before November 2017 when the NRPS was issued, there was hardly any rule.  In a market environment like that, the bigger players tend to dominate or even abuse a bit their market power.  E-payments was “fenced” by the big players in attempting to protect their interests. 
 
The result is limited inter-operability.  A depositor in Bank A can only transact with another depositor of Bank A, and not with a depositor of Bank B.  
And then since the big boys set the rules, some of the rules that are enforced are viewed to be discriminatory.  If you’re not one of them, you’re out. And the arrangements are bilateral – which are inefficient by nature.
 
Inter-connectedness and inter-operability is very important.  There should be a single network of inter-connected accounts in the Philippines.
If we want e-payments to flourish, this must be done. Fortunately in November 2017, the BSP issued circular 980 known as the NRPS Framework.  It is a policy and framework to establish a safe, efficient affordable and reliable retail payment system in the country. 
 
With NRPs, we can buy online, pay for goods and services, pay bills, send money, get our loan proceeds, pay back our loans, receive our salaries, and pay taxes and government fees.
 
The key principles of the NRPS are:
 
1) Industry self-governance.  Before NRPS, the e-payments market was more or less governed by the big banks.  They enforced that because they owned the switch.  When you join the switch, you are subject to rules.  And the rules were set by the owners of the switch.  
 
The NRPS changed that, ruling that the Payment System must be governed by the participants!
That is why the Philippine Payments Management Inc. was organized.
It has 15–man Board.  Seven of the seats are occupied by the seven top volume contributors.  So if your financial institution has a lot of e-transactions, you get a seat in the Board.
The one that uses the NRPS the most gets to have a say, which is fair. Occupying the Board are the stakeholders – banks and mobile money issuers, plus two independent appointees by the BSP.
 
Through of the NRPS Act, the BSP now oversees payment systems.  The BSP in turn delegates some of its oversight powers to the PPMI.  Under the PPMI are the automated clearing houses (ACH), a group of participants that want to use a specific service.  Now, the participants choose the switch!
There is one ACH for every unique payment stream.
 
2) All settlements happen at the BSP.  Thus, the public is assured of the safety and reliability of the payment service.  PesoNet is hitting 900,000 transactions a month.  InstaPay has breached 1 million transactions.  But the large values are in PesoNet, composed of 47 banks and electronic money providers like GCash, with more coming in soon.
 
3) It is about scale.  In the Philippines, there are less than 400 billers that are online.  Australia has 45,000 billers where you can pay through online. What’s the difference?  Inter-operability and inter-connectedness!  If you receive a check for Bank D but your account is in Bank E, you will have to wait for clearing.
 
The NRPS sees to it that small financial institutions and SMEs will be included.  Co-ops should be included.
 
4) The BSP says the cities and municipalities with bank offices is just 80% so 20% have no banks.
 
In ATMs, we have 25 atms per 100,000. POS 21 6 POS per 100,000 adults.
 
We need these to bridge between e-payments and cash.
 
Like Lazada, we expected most businesses to shift to the PesoNet for e-payments.  But that did not happen.  So we asked the businesses why they were not excited about switching.  They said : “we are solving the payments part.  The payments part is the last segment of the end-to-end chain.”  They are concerned about Official Receipts. We need that for tax payments.  So we are trying to solve that.
 
1) An inter-operable so any any payer can pay any dealer regardless of what bank or institution they are with.  This will make it efficient because the small to medium-scale businesses can participate.  Even co-ops can talk to the billers in their area and then digitalize their bills payment.
2) Inter-operable cash-in and cash-out pages.  They exist but there is no scale because they are too exclusive.  GCash agents can only deal with GCash account-holders.  We want any customer to pay anywhere and cash-in and cash-out with any agent.  We want it to be pervasive.
3) Right now we are about to initiate a study with a top accounting firm to assess the barriers to digitalizing invoice business processing.  The outcome is an action plan with financial institutions, government agencies, and businesses on how to make electronic receipts and e-taxes, and tax certificates to be allowed.  Manual transactions to e-transactions will now be end-to-end.
4)   We are now working with DBM to transition government disbursements through PesoNet.  The government right now makes 70% of their payments are already electronic but you will have to open an account with land bank or DBP.  But 30% are still using checks.
You must appreciate the potential.  Our findings are that 95% of Filipino adults are payers.  And of them, 81% ARE AWARE OF e-payments and 75% trust e-payments.  60% intend to use it but only 19% are actual users.  These 19% include your members.   So there is a lot of potnetitial for you to help plug your members into the financial and economic activities of the country!
 
I hope you will embrace that role.  It is a service that is also a good business.
 
According to the BSP study in 2017.  Of the 23% who own formal accounts, the top are the banks, NGOs, and cooperatives are only 2.9%.  So you need to overcome that weakness.  How?  By uniting!
 
You are not only fragmented, but you are also small.  So you really must unite!
 
You have a network of 5 million Filipinos so you must unite.
 
If you don’t work together, fragmented kayo and you will play with the big banks?  Wala tayong laban.  If we will take advantage of our scale and avoid overlapping services or duplicating investments & solutions, then co-ops will have a chance to match the established players.
 
You are only 2.9% of the 23% of Filipinos with formal accounts.  It’s not a big number, but our hope is in our unity.  That’s why you are called cooperatives.  You participate in the NRPS as one.
 
What will happen if co-ops if co-ops will not offer e-payments?  You miss out.  Everyone is talking about digital transformation and it is happening.  Look at Lazada.  People are transacting in the    online world.  If you don’t offer digital payments, the younger people will no longer be interested when they find out you are still into cash/check transactions.
 
The Philippine government targets 20% of transactions to be electronic or online.  Where are we now?
The government targets 20% by the year 2020.  Better than cash alliance is repeating the 2015 study where they measured 1% of transactions were mobile or electronic.  Instapay is growing, also PesoNet.
 
On BlockChain, cryptocurrencies, and Kaya, required by BSP? can regulate these cryptocurrencies.  The NRPS Act signed by Duterte last December, kasama ang co-ops sa oversight and supervision only in payments.  Yes, BSP also has regulations on cryptocurrency exchanges to BSP-issued money.  BSP is encouraging the fintecs to pilot, and see.  But in terms of adopting it as a universally-accepted form of payment, we are not yet there.  No jurisdiction in the world has done so.  Even the updates we get from banks for international settlements in international-standard setting bodies, they still say that cryptocurrency cannot yet replace fiat currency.  But if you have a brilliant idea in cryptocurrency, we encourage you to go with it.
 
Mert Tangonan is a digital financial services expert with over 20 years of experience leading projects that helped advance digital payments and financial inclusion across Southeast Asia and East Africa. His career spanned across the financial services, mobile telecommunications, IT, consulting, and development industries, with expertise in operations, technology, agricultural finance, business development and project management. He is currently the Chief of Party of USAID/Philippines’ E-PESO Activity that supported the development of the National Retail Payments System being implemented by the Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Prior to joining Chemonics, he has held senior executive and consulting roles in International Finance Corporation Indonesia, Mercy Corps, DAI, PT Smart Telecom, Globe Telecom, Accenture, and ING. Mert holds an Executive MBA from the Asian Institute of Management, and a Civil Engineering degree from the University of the Philippines.
 

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