REDUCING THE COST OF
INTERNATIONAL REMITTANCE THROUGH TECHNOLOGY
THE CASE OF THE PHILIPPINES
A Presentation by
Rosalinda O. Nieva
Deputy Director
Core Information Technology Supervision Group
A Presentation by
Rosalinda O. Nieva
Deputy Director
Core Information Technology Supervision Group
Bangko Sentral ng Pilipinas
Bangko Sentral ng Pilipinas
Bangko Sentral ng Pilipinas
Presentation Outline Presentation Outline
Remittance Highlights and Statistics
Technological Developments
Government Policy Initiatives and Strategies
Challenges
Remittance Highlights and Statistics
Technological Developments
Government Policy Initiatives and Strategies
Challenges
Bangko Sentral ng Pilipinas
REMITTANCE HIGHLIGHTS
& STATISTICS
REMITTANCE HIGHLIGHTS
& STATISTICS
Bangko Sentral ng Pilipinas
Workers’ Remittance and Compensation of Employees Received
Workers’ Remittance and Compensation of Employees Received
0 5,000 10,000 15,000 20,000 25,000
2000 2001 2002 2003 2004
In US$ Million
India China Mexico France Philippines Spain
Belgium Germany United Kingdom Lebanon
Source: World Development Indicators 2006, World Bank Source: World Development Indicators 2006, World Bank
Bangko Sentral ng Pilipinas
-10.95%
-0.32%
14.17% 10.05%
15.38%
25.01%
12.82%
0 2,000 4,000 6,000 8,000 10,000 12,000
2000 2001 2002 2003 2004 2005 1ST SEM '06
US$ Million
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
OFW Remittances Growth
VOLUME OF OFW REMITTANCES in the Philippines
VOLUME OF OFW REMITTANCES in the Philippines
Source: Bangko Sentral ng Pilipinas Source: Bangko Sentral ng Pilipinas
Bangko Sentral ng Pilipinas
Modes of Remittances Modes of Remittances
Formal Channels
Banks
Non-banks money transfer agencies/remittance companies (REMCO)Western Union, Money Gram
Telephone companies (Smart Padala, G-Cash)
Informal Channels
Courier services (“Padala” system)Door-to-door
Handcarry by friends or relatives Formal Channels
Banks
Non-banks money transfer agencies/remittance companies (REMCO)Western Union, Money Gram
Telephone companies (Smart Padala, G-Cash)
Informal Channels
Courier services (“Padala” system)Door-to-door
Handcarry by friends or relativesBangko Sentral ng Pilipinas
Technological Developments in the Remittance Business Technological Developments
in the Remittance Business
Bangko Sentral ng Pilipinas
Technological Developments Technological Developments
Introduction of Wireless ATMs to the rural areas
Increase of Rural Banks/Coop Banks with E-banking Licenses
Lower Costs of Internet Subscription
Introduction of Wireless ATMs to the rural areas
Increase of Rural Banks/Coop Banks with E-banking Licenses
Lower Costs of Internet Subscription
Bangko Sentral ng Pilipinas
Technological Developments Technological Developments
Mobile commerce (M-commerce)
Smart Padala
Globe G-Cash Internet-Based Transfers
Wire transfers
ACH transfers
Cheque transfers Mobile commerce (M-commerce)
Smart Padala
Globe G-Cash Internet-Based Transfers
Wire transfers
ACH transfers
Cheque transfersBangko Sentral ng Pilipinas
SMART Padala – Transaction Flow SMART Padala – Transaction Flow
OFW/Sender
Beneficiary
OFW goes to
REMCO to remit via Smart Padala. He fills-out an
information sheet.
REMCO submits to BDO/Smart pertinent information.
Note: Customer Care confirms information submitted by REMCO before beneficiary can activate the Smart Money on his celfone.
REMCO initiates request for assignment of the Smart Money number of the beneficiary.
REMCO instructs and authorizes the debit of funds from its smart money mother card for credit to the beneficiary’s smart money card.
Beneficiary activates the Smart Money on his celfone (or gets a physical card).
Beneficiary can now get cash from Cash Servicing Centers or ATMs (if with Card)
1
2
Bank
4
3
5
You have activated your Smart Money.
You have transferred 5,000 to 5577xxx
Bangko Sentral ng Pilipinas
G-Cash Remittance G-Cash Remittance
OFW/Sender
OFW goes to REMCO to send G-cash to beneficiary
1
Buy goods/services in partner establishments
2 3
Philippines You have
received P 10,000
Beneficiary G-Xchange carries out the
transfer (debit REMCO wallet; credit beneficiary wallet) and gives
confirmation to REMCO of successful transaction
Beneficiary is informed via SMS of the G-Cash
remittance
Beneficiary receives an SMS that he/she has received the G- cash
Beneficiary can do the ff:
4
Merchant
REMCO
REMCO instructs G-Xchange via webtool or SMS to transfer G- cash from its own “wallet” to the target
number’s wallet
Subscribers
Transfer G-cash to other subscribers
Accredited outlet
Convert G-cash to cash
Bangko Sentral ng Pilipinas
Internet-based remittance system Internet-based remittance system
OFW/Sender
1
internet
E-banking server
Debit card ATM Over the counter
Core banking server
Beneficiary
Bangko Sentral ng Pilipinas
Comparative Remittance Fees Comparative Remittance Fees
Country Credit to bank Account
Door-to-Door Pick-up G-Cash (Globe)
Smart Padala
USA USD 7 - 14 USD 12 - 16 USD 10 - 12 NA USD 6 - 8 Singapore SGD 2.5 - 5 SGD 7 - 15 SGD 10 - 20 SGD 2.45 - 3 SGD 8
Hongkong HKD 18 - 25 HKD 25 - 35 HKD 30 - 40 HKD 14 - 20 HKD 15.20 Taiwan NT 200 - 250 NT 250 - 300 NT 300 - 350 NT 150 NA
Average cost of remittance Average cost of remittance Today:
13.5%
Today:
13.5%
Less than a decade ago:
20%
Less than a decade ago:
20%
Bangko Sentral ng Pilipinas
GOVERNMENT POLICY INITIATIVES AND STRATEGIES
GOVERNMENT POLICY INITIATIVES AND STRATEGIES
Executive Order No. 446
DOLE to coordinate and oversee various initiatives for OFWs
Seeks to synchronize different government agencies’ programs for OFWs to serve the current development objectives of thegovernment
Creates a Technical Working Group and Sub-groups Executive Order No. 446
DOLE to coordinate and oversee various initiatives for OFWs
Seeks to synchronize different government agencies’ programs for OFWs to serve the current development objectives of thegovernment
Creates a Technical Working Group and Sub-groupsBangko Sentral ng Pilipinas
INITIATIVES AND STRATEGIES to Reduce Remittance Fees
INITIATIVES AND STRATEGIES to Reduce Remittance Fees
Proposed Philippine-Japan Initiatives
Allow money transfer companies (MTCs) to partner with Japanese banks in providing remittance services
Interconnection of commercial and rural banks
Installation of G-cash services in rural banks
Proposed Philippine-Japan Initiatives
Allow money transfer companies (MTCs) to partner with Japanese banks in providing remittance services
Interconnection of commercial and rural banks
Installation of G-cash services in rural banksBangko Sentral ng Pilipinas
BSP INITIATIVES BSP INITIATIVES
M.B. Resolution No. 1389 dated 27 October 2005
Creation of four (4) Working Groups (WGs) to facilitate initiatives on improving theenvironment for OFW remittance flows
Executive Committee shall steer the work of the WGs M.B. Resolution No. 1389 dated 27 October 2005
Creation of four (4) Working Groups (WGs) to facilitate initiatives on improving theenvironment for OFW remittance flows
Executive Committee shall steer the work of the WGsBangko Sentral ng Pilipinas
BSP INITIATIVES BSP INITIATIVES
Executive Committee Objectives:
To reduce remittance costs to facilitate remittances through formal channels.
To channel foreign exchange savings to micro- enterprise activities and other alternativefinancial instruments.
Executive Committee Objectives:
To reduce remittance costs to facilitate remittances through formal channels.
To channel foreign exchange savings to micro- enterprise activities and other alternativefinancial instruments.
Bangko Sentral ng Pilipinas
BSP INITIATIVES BSP INITIATIVES
Working Groups:
On Payments and Settlements System
On Promoting Financial Savings and Investment
On International Relations
On Advocacy Campaign Working Groups:
On Payments and Settlements System
On Promoting Financial Savings and Investment
On International Relations
On Advocacy CampaignBangko Sentral ng Pilipinas
BSP INITIATIVES BSP INITIATIVES
WG on Payments and Settlements System Objectives: Formulate recommendations on how to improve the interconnectivity of remittance service providers in the Philippines with those abroad
Explore domestic issues on payments and clearing systems
Review existing banking regulations that affect the payments and clearing systems as well as the country’s overall remittance environment
WG on Payments and Settlements System Objectives: Formulate recommendations on how to improve the interconnectivity of remittance service providers in the Philippines with those abroad
Explore domestic issues on payments and clearing systems
Review existing banking regulations that affect the payments and clearing systems as well as the country’s overall remittance environment
Bangko Sentral ng Pilipinas
Challenges
Challenges
Bangko Sentral ng Pilipinas
R.A. No. 9160, as amended by R.A. No. 9194 (Anti Money Laundering Law)
• Covered institutions should report to the AMLC all covered and suspicious transactions within five (5) working days from occurrence thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working days.
¾Covered transaction- a transaction in cash or other
equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos
(P500,000.00) within one (1) banking day.
R.A. No. 9160, as amended by R.A. No. 9194 (Anti Money Laundering Law)
• Covered institutions should report to the AMLC all covered and suspicious transactions within five (5) working days from occurrence thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working days.
¾Covered transaction- a transaction in cash or other
equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos
(P500,000.00) within one (1) banking day.
Potential Obstacle to higher OFW Remittances
Potential Obstacle to higher OFW
Remittances
Bangko Sentral ng Pilipinas
Conditions imposed on M-commerce service providers
Conditions imposed on M-commerce service providers
Service provider to engage only licensedremittance companies supervised by the regulatory authorities
Adopt a lower transaction cap of P100 thousand per month¾
Transactions refer to electronic payment, ATM withdrawal, encashment through cash service outlets, transfer of funds and other similar type of transactions
Service provider to engage only licensedremittance companies supervised by the regulatory authorities
Adopt a lower transaction cap of P100 thousand per month¾
Transactions refer to electronic payment, ATM withdrawal, encashment through cash service outlets, transfer of funds and other similar type of transactionsBangko Sentral ng Pilipinas
Conditions imposed on M-commerce service providers
Conditions imposed on M-commerce service providers
“Know your customer” (KYC) procedures undertaken by m-commerce accreditedestablishments should satisfy the requirements of AML regulations
Service provider to have access to all records and database of participating outlets
Allow BSP to review the m-commerce system
Give Anti-Money Laundering Council access to customer records
“Know your customer” (KYC) procedures undertaken by m-commerce accreditedestablishments should satisfy the requirements of AML regulations
Service provider to have access to all records and database of participating outlets
Allow BSP to review the m-commerce system
Give Anti-Money Laundering Council access to customer recordsBangko Sentral ng Pilipinas
