Government, private sector can save up to $45 billion on digitalization

MANILA, Philippines — The government and private sector are expected to save up to $45 billion annually following the decision of the Bangko Sentral ng Pilipinas (BSP) to ramp up digital payments in the country, according to the United Nations’ Better Than Cash Alliance (BTCA).

In a report titled “The state of digital payments in the Philippines,” BTCA said sustaining the momentum toward digital payments would have an outsized impact for the stakeholders.

The organization said previous studies have shown that electronic-invoicing and digitizing supplier payments produce cost savings of up to eight percent of transaction amount.

“We estimate that the formal sector in the Philippines makes payments worth approximately $44.9 billion monthly. This translates into savings worth $1.8 billion monthly, or $21.5 billion annually,” BTCA said.

Based on the higher end of the range, the country could save as much as eight percent or $3.8 billion per month or close to $45 billion per year thorugh the digitalization of supplier payments.

On the other hand, the cost of government to people (G2P) payments is 1.5 percent higher than that of digital means that is currently pegged at 0.7 percent.

“Of the $2.6 billion in G2P payments per month, over $1 billion is paid non-digitally. This translates to annual savings of $100 million for the government in G2P payments alone,” it said.

To further accelerate growth in digital payments, BTCA said all stakeholders need to work together to improve awareness, ubiquity, convenience and create compelling reasons for payers to go digital.

It said the Philippine Payments Management Inc. (PPMI) needs to build platforms to enable fast growth in digital remittances and utility payments, while payment service providers should create a strong value proposition for small merchants.

Likewise, it said the private sector and the BSP should build awareness and trust in digital payments as well as eOR acceptance and create digital invoicing system with the leadership of the Bureau of Internal Revenue (BIR).

BTCA said the technical working group under the Finance and Management Committee should continue to promote the use of e-payments across government agencies.

The UN agency also said the government should leverage the rollout of the national ID through Republic Act 11055 or the Philippine Identification System (PhilSys) Act.

BTCA said the BSP should also begin tracking absolute volume of transactions to allow for easy progress monitoring.

It said digitizing welfare payments and converting cash cards to basic accounts would provide up to 11 million individuals with their first digital store of value.

“Assuming that these newly banked consumers comprise half of the number of transactions of those who are currently banked in a month, this is equivalent to nearly 86.5 million additional digital transactions,” BTCA said.