The Bangko Sentral ng Pilipinas (BSP) expects to bring down the costs of cross-border retail payments including fees on remittances from five percent to just one percent via the Bank for International Settlements’ (BIS) Nexus Project, according to BSP Governor Eli M. Remolona Jr.

Remolona, currently in San Francisco, California, for a Philippine Economic Briefing with other economic managers, said the plan under a global Nexus is to cut the fees on wire transfers or payment transfers over time.

“It costs about 5% now to send money to the Philippines when it comes to retail payments. We want to bring it down to 3% and eventually bring it down to 1%,” he said on Nov. 15 during the US investors’ briefing (Nov. 16, Philippine time).

The Nexus, a prototype developed by the BIS Innovation Hub Singapore Centre with the central banks of Italy, Malaysia and Singapore, connects payment system operators with the Eurosystem’s TARGET Instant Payment Settlement (TIPS), Malaysia’s Real-time Retail Payments Platform (RPP) and Singapore’s Fast and Secure Transfers (FAST).

The BSP and four central banks in the region such as Singapore, Malaysia, Indonesia and Thailand, will connect their domestic instant payment systems (IPS) to the Nexus system.

“We’re now working with our ASEAN partners to develop the Nexus payment system which should be digital and interoperable and then from then on, because this system is designed to be interoperable across banks around the world, we hope to go global and in the process reduce the fees for say remittances,” said Remolona who once worked for the BIS for 20 years, both in Basel, Switzerland and Hong Kong BIS offices.  

The Nexus’ second phase is expected to enable central banks in the region to have multilateral connectivity of fast payment systems. It will enhance cross-border real-time retail payments that can facilitate financial integration within the region.

The BSP, BIS and the central banks in the ASEAN trade bloc expect the Nexus’ standardised and multilateral network will link the different IPS for a wider connectivity and multilateral cross-border network.

The BSP has said previously that in the next phase, BIS and the central banks of Indonesia, Malaysia, Singapore, Thailand and the Philippines will jointly work towards connecting their domestic IPS through Nexus.

The collaboration includes Bank of Italy, Central Bank of Malaysia (BNM) and Monetary Authority of Singapore (MAS), and the payment systems operators PayNet and Banking Computer Services (BCS).

The BIS and the central banks including the BSP plan to have Nexus implemented globally.

To accomplish this, a Global Advisory Panel of central banks and payment system operators will be established for the Southeast Asian region with the Bank of Italy and the European Central Bank as members.

Based on a November 2022 Memorandum of Understanding on Cooperation in Regional Payment Connectivity, Bank Indonesia, BNM, BSP, MAS and the Bank of Thailand will leverage experiences from Phase I and Phase II of the Nexus project to connect IPS and facilitate cross-border transactions for some 500 million people in the region.  

Nexus supports the G20 priorities of improving the cost, speed, access and transparency of cross-border payments by connecting domestic IPS across multiple countries through a standardised and multilateral approach.

In the Philippines, the BSP has the PESONet and InstaPay under the National Retail Payment System which was launched in 2017.

PESONet enables high-value transactions and may be considered as an electronic alternative to the paper-based check system. InstaPay is a real-time, low value electronic fund transfer facility for transactions up to P50,000 and is most useful for remittances and e-commerce.

As of end-September this year, cash remittances sent home by both land-based and sea-based overseas Filipinos amounted to $24.494 billion, up 2.8 percent year-on-year. The BSP forecasts remittances through the banking system will grow by three percent in 2023.

Typically, an overseas Filipino remits a minimum $500 a month to a supported household in the Philippines. The BSP has long since tried to reduce remittance fees for Filipinos abroad.

About 41.5 percent of remittances came from Filipinos based in the US; 6.9 percent from Singapore; six percent from Saudi Arabia; five percent from Japan; and 4.8 percent from the United Kingdom.

Based on a central bank survey, families that are dependent on an overseas Filipino relative use remittances to pay for food, rent and education.

Remittances are also spent on medical expenses, savings, payment of debts, investments, and purchase of motor vehicles.