They expect banks to develop a timely cash management solution for them, no longer just within the conventional cash management system of collections and payments.
There are 27 regional clearing units in the Philippines. As is the case elsewhere in Asia, the trend in collection services, especially with regard to high-volume transactions, is to outsource the process to banks. Checks are collected on behalf of corporations, and banks send regular reports for reconciliation purposes.
Furthermore, hard-copy reports are now being replaced by electronic reporting, which provides corporations with more timely updates on collection activities. Banks also provide provisional receipts of checks collected, which is important to payees in the Philippines in particular.
Check warehousing is another component of the collection facilility offered by Philippine banks and one that is popular with customers. It allows post-dated checks to be held by the bank for safekeeping. Because of this service, corporate customers are relieved of their daily task of monitoring checks for deposit; the bank makes sure they are deposited on the value dates and that the cut-off time for clearing is met. For banks, it ensures funds are deposited with them; for corporates, it relieve them of the arduous task of collection, monitoring and reconciliation.
Physical collection is by far the largest cash management gap of foreign banks in the Philippines due to their limited distribution networks. However, alliances are being forged with local banks to use the local branch network as collection points. The local banks benefit by receiving a piece of the business that had otherwise not been available to them. The level of technology, reporting and reconciliation capabilities, and the strategic branch network fo the local banks, are key considerations in such alliances.
Domestic electronic peso payments are affected through the local payments system (LPS), and domestic electronic dollar payments through the Philippine Domestic Dollar Transfer System (PDDTS), handled by the Citibank branch. LPS pays in three days, while PDDTS pays at the end of the day. This makes PDDTS the more popular mode of payment for dollar settlement domestically, as the three-day reclamation in LPS is limiting.
To attempt a same-day credit on peso payments, LPS is not used and instead it has become almost mandatory for both the payor’s and payee’s accounts to reside in the same bank, with the preferene being a bank with a wide distribution network. The service level is practically ignored, without regard to whether the bank of choice will actually credit the payee on time. This restrains efficiency in domestic payments and possibly compromise a timely payment.
The BSP is currently embarking on a project to establish a real-time gross settlement (RTGS) system for doemstic payments, targeted for 2002. The final beneficiary of this initiative will be local businesses. A number of foreign and leading local commercial banks have systems capable of linking up to an industry-wide RTGS system, although the absence of the right infrastructure has prevented implementation in the country so far. When the infrastructure does become available, it will improve efficiency in the processing of domestic electronic payments.
International telegraphic transfers or payments are generally coursed through swift or SPEEDLINK. Cost and efficiency are two factors normally considered by corporations when deciding which bank and which electronic payment service to use, and, for their part, the banks offer competitive pricing. In a number of instances, both foreign and local banks offer free telegraphic transfer services as part of a larger package, but foreign banks generally have the edge over the local banks when it comes to efficient delivery of international electronic payments because of their global distribution networks. Banks capitalize on their ability to integrate bulk payment instructions through electronic banking systems, and some local banks have also begun to offer this service.