Rommel Santos, president and founder of Smart Asset Management (SAM) Digital Technologies, a Filipino-owned and controlled FinTech company based in Australia, said blockchain technology could play a pivotal role in delivering a digital footprint (an ability to interact with established financial infrastructure) to the unbanked in the Philippines, allowing access to financial services.
“Blockchain technology being a decentralized environment, promotes trust in a trustless environment. Promoting such kind of security, more people are feeling more confident and safer when transacting any business that uses the blockchain platform,” Santos said in an interview with Forkast.News.
Getting the unbanked to step in
He explained these unserved, underserved, and unbanked sectors in the Philippines must establish their digital footprints to allow them access to services that can eventually provide funding for their businesses.
Data from a Bangko Sentral ng Pilipinas (BSP) report showed that a majority or about 70 percent of the adult population in the country remain unbanked, rendering them unserved by financial institutions. However, about seven out of 10 individuals in this unbanked section have smartphones. This could provide an opportunity to leverage mobile phones for digital financial transactions, providing access to otherwise out-of-reach services.
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The BSP survey further claims that the COVID-19 pandemic has created an opportunity to develop digital transactions across the Philippines, particularly the unbanked sectors, and added the government segment should lead the way.
“The Covid-19 pandemic has demonstrated the necessity and benefit of digital payments, creating opportunities to accelerate broad-based adoption. Since government disbursements in cash are unexpectedly high, the government can lead the digitalization efforts,” the survey reports. It goes on to note that “more than half (56%) of recipients of government benefits received the funds via cash or check.”
A rise in digital payment methods is also indicated. “In terms of retail payments, the use of online banking for fund transfers (PESONet and InstaPay) and QR code for day-to-day payments such as transportation has been gaining traction as an alternative to cash because of the imposed movement restrictions and the public’s aversion to face-to-face transactions for health reasons.”
BSP works out regulatory systems for crypto
More recently the central bank’s push to digitize continues in the form of reporting that they “have seen accelerated growth in the use VCEs [virtual currency exchanges] in the past three (3) years and it is high time that we broaden the scope of existing regulations,” a January BSP press release details. The Philippines has also seen the recent development of a crypto-and-FinTech regulatory sandbox, for the trialing of new blockchain-based financial technologies.
Santos lauded the moves of the country’s central bank in promoting digital transactions.
“The BSP is doing all it can to promote the adoption of blockchain technology, particularly in the banking sector. We still need to do more research and advance the implementation of this technology. Being in the financial industry, this is one of the best moves of the BSP in contributing to the adoption and acceptance and implementation of this [blockchain] technology.”
The aforementioned BSP survey doesn’t focus on blockchain specifically, but digital payments systems in general. Regarding financial inclusion initiatives of BSP, “only 1 in 4 Filipino adults (25%) know any of the initiatives launched by the BSP regarding financial inclusion,” the survey concludes. With cryptocurrencies and central bank digital currencies (CBDC) now being watched closely by private users and regulatory bodies alike, it will be interesting to see how BSP implements the technology moving forward.