National ID system a boost to financial inclusion — BSP

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said the enactment of the national ID law is a big boost to its efforts to increase the level of cashless transactions to 20 percent by 2020 from about one percent.

BSP Governor Nestor Espenilla Jr. said the signing of Republic Act 11055 or the Philippine ID System (Philsys) Act by President Duterte last Aug. 6 could exponentially push forward the central bank’s digitalization and financial inclusion agenda in line with the launch of the National Retail Payment System (NRPS) last December 2015.

“Among other benefits, this will democratize access to transaction accounts.  Full participation to the digital payment ecosystem envisioned under the NRPS will be within reach.  Key barriers to account opening will be removed,” he said. 

Espenilla said the new law would directly benefit low-income and vulnerable sectors of society as costs of on-boarding are lowered and the need to present acceptable identification forms is addressed. 

“Philsys can also remove friction points and facilitate powerful use-cases for digital payments like government cash transfers. Down the road, it will allow convenient fund transfers with individual Philsys numbers as identifiers.  The possibilities and prospects are endless,” Espenilla added.

For his part, FintechAlliance.PH chairman Lito Villanueva said the creation of a centralized identification system would enable Filipinos to access financial services and close the financial gap in the country.

“Millions of Filipinos are denied access to financial services because they unfortunately lack an identification card to show to banks. The recently signed Philippine Identification System Act effectively gives unbanked and uncarded Filipinos the legal recognition they need to be able to live fully as citizens such as having easier access to financial services,” Villanueva said.

Villanueva, who also sits as the managing director of FINTQ, said the law is a great equalizer to scale financial inclusion as the digital identification for all Filipinos would be recognized by the public and private sectors.

According to the BSP’s 2017 Financial Inclusion Survey, only 22.6 percent of adult Filipinos have formal accounts from banks and non-banks.

“The national ID system makes Voyager’s goal of including 30 million Filipinos into the formal financial system achievable by 2020. According to the BSP, one of the factors for the decline in loan disbursements by formal financial institutions in 2017 was the lack of necessary ID,” Villanueva said.

Villanueva added the national ID would protect consumers as it addresses different pain points to prevent them from being victims of fraudulent activities.

Villanueva encouraged banks, other financial institutions, and government agencies to leverage on the passage of the Philsys Act in accelerating efforts towards digital financial inclusion.