BSP approves rules on batch e-payments

Published January 23, 2022, 10:10 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has approved the rules and guidelines on the batch settlement of electronic payments (e-payments) and the new provisions for Clearing Switch Operators (CSOs) of the automated clearing houses (ACH), InstaPay and PESONet.

These key provisions include requiring clearing participants or CSOs to maintain a separate demand deposit account (DDA) per settlement mechanism type.

BSP Governor Benjamin E. Diokno, who signed Circular No. 1135 (Guidelines on the Settlement of Electronic Payments Under the National Retail Payment System or NRPS Framework) on Jan. 21, said the guidelines provide the responsibilities and minimum requirements for InstaPay, PESONet and CSOs.

“The policy retains existing provisions applicable to instant retail payments while incorporating new provisions relevant to batch settlement of e-payments. This new set of guidelines is expected to strengthen the credit and settlement risk management for batch settlement of electronic payments,” said Diokno late Friday.

The circular issuance is in time to the BSP’s launching of the PESONet Multiple Batch Settlement or PESONet-MBS on Monday, Jan. 24. This is the latest BSP digital e-payment streams that will bring more payment transactions into the digital space.

With the batch settlement, BSP expects to increase the frequency of PESONet settlement to two cycles in a banking day for a faster end-users clearing and settlement. At the moment, the PESONet could only transact a single batch settlement in a day for same day settlement.

Based on the circular, CSOs implementing batch settlement of e-payments will enable clearing participants to effectively monitor the sufficiency of their respective DDA balances for every settlement cycle.

The circular also emphasized that clearing participants in the PESONet-MBS must have the necessary operational and liquidity risk management measures in place to ensure there will be no prefunding issues..

By BSP definition, batch clearing and settlement of electronic payments pertains to the bulk processing, clearing and settlement of payment instructions at set intervals based on a specified cut-off time. Multiple batch settlement, on the other hand, is a settlement mechanism of electronic payments involving more than one batch settlement cycle in a clearing day.

PESONet is a batch electronic fund transfer which can be considered as an electronic alternative to the paper-based cheque system.

In setting the PESONet-MBS guidelines, the BSP said it will “ensure efficiency of payment systems in the country” and requires participating BSP-supervised financial institutions (BSFls) in ACH for instant retail payments electronic payments to “provide certainty of settlement of the multilateral clearing obligations of the clearing participants.”

Clearing participants are responsible for monitoring and ensuring that their respective DDAs are sufficient to settle their obligations for each and every settlement cycle, said the BSP.

The BSP achieved its target of reaching 20 percent of digital payments volume by 2020 and even slightly exceeded the target at 20.1 percent. By mid-2023, this will reach 50 percent, based on the BSP Digital Payments Transformation Roadmap.

The increased usage of digital payments was largely driven by high-frequency, low value retail transactions such as person-to-merchant (P2M) payments and person-to-person (P2P) payments such as electronic fund transfers.

In a statement Friday, the BSP said the issuance of the new guidelines for the different settlement mechanisms under the NRPS Framework “is crucial in the proper implementation” of Republic Act No. 11127, or the National Payment Systems Act, “which mandates the BSP to ensure that payment systems are operated in a safe, efficient, and reliable manner.”