The Bangko Sentral ng Pilipinas (BSP) is finalizing a proposed basic merchant account framework to enable ambulant vendors accept digital payments within the year.
BSP Deputy Governor Bernadette Romulo-Puyat on Tuesday, Aug. 30, said the BSP is about to release the guidelines for the new account product specifically designed for ambulant vendors or street hawkers who travels – whether on foot or on tricycles or bicycles – to sell their goods.
Romulo-Puyat told members of the American Chamber of Commerce of the Philippines during its “Digital Innovation: Advancing Financial Inclusion for MSMEs (micro, small and medium enterprises)” forum that the basic merchant account framework “is forthcoming”. Along with the recently launched Paleng-QR Ph to onboard market vendors and tricycle drivers in the use of the QR technology, she said the two initiatives will further promote digital adoption among MSMEs.
BSP Director Ellen Joyce Suficiencia, in the same event, said the exposure circular draft for the basic merchant account framework will be released in September this year. “Hopefully within the year we will be able to issue this,” she said.
The new BSP product is tailored fit for the micro and small merchants’ requirements to start accepting digital payments. One of the significant features of these accounts is that it will remove transaction fees that are being paid by customers. “That transaction fee will become irrelevant in a person-to-merchant account,” said Suficiencia.
When the basic merchant account is implemented, the BSP is hoping that merchants will be encouraged to use this.
“We know many merchants are unable or unwilling to open merchants accounts because of the cost and documentary requirements involved which are not really tailored for these types of market. So, with a basic merchant account, we’re streamlining. We’re developing a product the opening and the maintaining costs will be affordable,” she added.
The BSP will simplify documentary requirements and make them as minimal as possible.
“We’re looking at ambulant vendors as possible users of this basic merchant account,” said Suficiencia.
While some vendors and market stall owners are already using QR code payments, most of these accounts are under the merchants’ personal accounts.
“If we really want to promote interoperable seamless digital payments in the markets for vendors, it’s important to promote use of merchant account wherein it’s no longer the customer who needs to pay transaction fees in cases between two different account providers – or one bank account to a merchant’s account held in another financial service provider -- in that case it will be the customer that will pay the transaction fees. But in the case of a merchant account, that issue will be addressed because there won’t be anymore (fees),” said Suficiencia.
Romulo-Puyat said while financial inclusion has been steadily improving, much has yet to be done to achieve its full potential especially in making more Filipinos as financially resilient as possible.
At the moment, the BSP is intensifying its inclusive digital finance development. The BSP is building the innovation platforms or Inclusive Digital Finance 2.0 around the digital ID system, the central bank digital currency, and open data.
Grab Financial Group Philippines’ head of lending, Erwin N. Yamsuan, who presented Grab’s Quick Cash Loans product during the event, said the trend in digital lending is growing fast as it helps MSMEs get access to credit.
He cited a World Bank figure that showed there is a big financing gap in the small and medium businesses’ sector of about 76 percent of GDP. About 79 percent of local microenterprises have no working capital post-pandemic.
These structural gaps have prevented banks from lending SMEs. Banks also consider SMEs as higher risk borrowers. However, Yamsuan said digital lending can address these market gaps.
The BSP is confident of the positive impact of the digitalization shift from cash-heavy to cash-lite. Digitalization continue to unlock benefits for the economy, especially small businesses which have taken into the digital migration swiftly due to the pandemic.
Bulk of retail payments continue to be payments to merchants for purchases of goods and services, and over 99 percent of businesses are MSMEs, according to the BSP.