BSP reviews currency for cash-lite, coinless society

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said they are analyzing and reviewing the currency denominational structure as the country transitions into a cash-lite and non-coin society.

“The BSP is currently reviewing the existing currency denominational structure in light of the noted decrease in the demand for coins,” said Diokno. This led him to announce that besides going cash-lite payment environment in less than three years, the BSP will now prepare the public for an eventual coinless payment method by 2025 or even earlier.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno (MB file)

The BSP’s Payments and Currency Development Sub-sector is in charge of the currency denomination structure review which would likely include banknotes and coin denomination – from the lowest of coins to the highest of banknotes value – that are projected to have enough demand to keep on as the BSP shifts to more e-payments system.

The BSP used to disclose data of currency in circulation, the issued, distributed and retired banknotes and coins. This data has not been seen in its website for some time or it has been de-linked for unknown reasons. This should have disclosed the BSP’s cash cycle, and the volume and value of both banknotes and coins in current circulation.

With that, Diokno explained that BSP will have a “phased approach” wherein the country “will transition from a cash-heavy to a state where there is less cash and less coins which is expected as the widespread adoption of electronic payments (e-payments) is pursued.”

“Rest assured, the BSP will continue to engage the public to ensure that Filipinos will adjust well to this transformation and ensure that no Filipino is left behind in our pursuit of inclusive economic growth,” said the BSP chief.

The BSP has studied other economies on how they transformed into not just a cash-lite but coinless society. Research findings show that shifting towards a cash-lite system benefited business and economic activities, said Diokno. “It would unlock benefits for the economy, including cost savings and swift turnaround of economic activities through faster and more efficient payment systems. Promoting e-payments also reinforces the BSP’s agenda for enhancing financial inclusion as digital payment innovations pushes down transaction costs and the main barriers to account ownership,” he said.

Empirical data, Diokno added, indicate “other motivations.” He was not surprised though, that with the rise in e-payments, coin demand in 2020 fell by 60 percent in value and 57 percent in volume, year-on-year.

At present, the BSP prints five banknotes denominations and seven coin denominations. There used to be six banknotes and six coins plus the 10-sentimo, but when Diokno became BSP’s fifth governor, he pursued the gradual phase out of the P20 bill to a P20 coin which the central bank circulated in 2019.

The seven coins produced by the BSP are the 1-sentimo, 5-sentimo, 25-sentimo, 1-piso, 5-piso, 10-piso and 20-piso. The 10-sentimo has been removed when the New Generation Currency coins were re-launched in 2018, but it was not demonetized.

Both the banknote and coin version of the P20 will continue to co-exist until the BSP runs out of materials for the P20 banknote, but to date, the BSP has not called for its demonetization yet. The five banknotes remain as the 50-piso, 100-piso, 200-piso, 500-piso and 1,000-piso.

The impending coinless phase in payments transactions is an addition to the cash-lite target. By 2025, Diokno will no longer be the BSP governor unless he was reappointed for a second six-year term, and it will also be past the Duterte administration’s term as well.

The movement restrictions brought on by the COVID-19 pandemic accelerated the growth of e-payments. Last year, the volume of PESONet transfers went up by 376 percent year-on-year to 15.3 million while the value increased by 188 percent to P951.6 billion. InstaPay volume, in the meantime, rose by 459 percent to 86.7 million, while transactions were valued at P463.4 billion, up by 340 percent year-on-year.

Since its launch in 2017 until end-2020, the combined PESONet and InstaPay transactions expanded by 10,802 percent in volume while value transactions increased by 929 percent.

The BSP is updating data on the e-payment measurement for 2020 but preliminary numbers on the use of digital payments during the pandemic “give us optimism,” said Diokno. “We’re likely to achieve the 50 percent target sooner rather than later.”