The Bangko Sentral ng Pilipinas (BSP) is planning on putting up an electronic or e-money protection fund in case the bank or non-bank holding the e-money has liquidity issues.
The BSP is currently studying the e-money fund protection scheme and is expected to soon release findings and recommendations on how to set it up.
Banking co-regulator the Philippine Deposit Insurance Corp. (PDIC) has also been looking into the possibility of insuring quasi-deposits such as e-money.
PDIC President Roberto B. Tan said previously that new regulations would have to be crafted to cover the insurance of e-money. Under the PDIC Charter, bank deposits are insured up to a maximum P500,000 per depositor per bank.
There are proposals to increase this amount to P1 million, however the Senate Bill No. 2089 amending the PDIC law filed by Sen. Sonny Angara last month did not specifically include e-money – either issued by banks or non-banks — as insured quasi-deposits.
For now, these e-money accounts do not have the same insurance or protection as bank accounts.
The study on e-money fund protection scheme, which was started in 2020 and will be released this year, is part of the BSP’s digital payments goals. One of the reasons for the study is that similar to electronic money issuers or EMIs which can go bankrupt, e-money accounts also have risks of bankruptcy if the bank holding the trust account with the e-money float will encounter cash problems.
The BSP wants to find out the appropriate risk management mechanisms that can
be implemented to protect end-user funds held by EMIs in the same way that bank
deposit accounts are secured by deposit insurance schemes.
It also noted that this initiative on end-user fund protection should help the central bank to encourage public trust in and uptake of e-money accounts to increase the use of digitalization of payment transactions.
The use of e-money accounts for digital payments saw a significant increase in 2020, during the first COVID-19 pandemic year, when it became a necessity because of the imposed lockdowns. Even when movement restrictions were lifted, e-money transactions were preferred over actual exchange of physical money because of social distancing.
During the height of the lockdown, the BSP has noted an increase in e-money users to 37.5 million, up from 29.4 million same time in 2019. Both inflow and outflow transactions amounted to P750 billion each.
The BSP since 2010 has registered 29 banks with EMIs. There are also 31 non-banks with EMIs as money transfer agents or distributors that function as cash-in/cash-out agents of e-money issuers.
E-money is not virtual currency. It is the digital version of real or fiat money and both are legal tender. E-money is convertible to fiat currency by licensed EMIs or agents.
The BSP considers e-money as having monetary value as it is electronically stored in an instrument or device such as cash cards, stored value cards, or e-wallets accessible via mobile phones or other access devices. It is also issued against receipt of funds of an amount not lesser in value than the monetary value issued. It is accepted as a means of payment by persons or entities other than the issuer and withdrawable in cash or cash equivalent, said the BSP.