E-money and E-banking in the
Philippines
Core Information Technology Specialist Group
Bangko Sentral ng Pilipinas (BSP)
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Presentation Outline
1. Background and Enabling Environment to E-
Money
2. E-money Mechanics
3. Philippine Experience on E-money
4. E-Money and E-Banking Regulation
5. Other Related Regulations
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Current Scenario
90M Population
26% of Filipinos have More than 60% of the
access to formal population have mobile
financial channels phones
1.5B text messages/day
10M Overseas Filipino
Workers send
remittances regularly
610 out of 1635 99% mobile phone
municipalities coverage
do not have banks Philippine MAP
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Financial Services via Mobile Phones
Reach the bankable but
un-banked segment
Provide increased
CONVENIENCE at LOWER
COST
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Enabling Environment to E-Money
1. Allow non-banks to offer mobile money
2. Remittance Agents allowed to perform Cash-
In/Cash-Out
3. Simplification of requirements for KYC
4. Formalized guidelines on issuance of
electronic money
5. Competitive business models allowed to be
tested
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Presentation Outline
1. Background and Enabling Environment to E-
Money
2. E-money Mechanics
3. Philippine Experience on E-money
4. E-Money and E-Banking Regulation
5. Other Related Regulations
6
Electronic Money
Definition:
Monetary value as represented by a claim on its
issuer, that is –
a. Electronically stored in an instrument or device;
b. Issued against receipt of funds of an amount not
lesser in value than the monetary value issued;
c. Accepted as a means of payment by persons
other than the issuer;
d. Withdrawable in cash or cash equivalent; and
e. Issued in accordance with BSP Circular No. 649
dated 9 March 2009
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Electronic Money
Total accumulated cash value not
to exceed P100 thousand/month
Basic Redeemable at Face Value
Features
Not a Deposit
Compliant with AMLA
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Types of E-Money
Prepaid Cash Cards
Electronic Wallet
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Benefits to Users
Reduced travel time & cost
Reduced risk
Convenient
Time saving
Increased sales
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Presentation Outline
1. Background and Enabling Environment to E-
Money
2. E-money Mechanics
3. Philippine Experience on E-money
4. E-Money and E-Banking Regulation
5. Other Related Regulations
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Flexibility to Different Models
Smart Money – Normal Challenge
In 2004, BSP approved this as e-banking product of
Banco de Oro subject to existing regulations on
electronic banking (X701 of the MORB) and
outsourcing (X162.2 of the MORB)
G-cash – Harder Challenge
In 2005, BSP approved the product of GXI (a Non-
bank)
Consumer Protection, AML/ CFT issues
Safety and soundness of the e-money product
GXI fully cooperated with BSP in designing its
business model to achieve market acceptance
GXI registered with BSP as a “remittance
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agent”
Approaches to Mobile Commerce
Bank-Centric or the Bank-led model
Telco-Centric or the Nonbank-led model
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Approaches to Mobile Commerce
Bank-Led
The bank has the primary relationship with the
account holders
Telco operates and maintains the technology
Usually requires the user to have an account
with the bank that is not treated as a deposit
but an electronic money (e-money)
The bank is the E-money Issuer (EMI)
Telco’s agents serve as cash in-cash out
centers
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Bank-led Model
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Registering to the Smart Money
1 User goes to
the Smart 2 User will 3 User can
Wireless Center receive the convert actual
to register Smart money cash to
(name, address, card electronic
number) and money in MIMO
present valid ID centers
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Approaches to Mobile Commerce
Telco-Centric/Nonbank-Led
Telco has a subsidiary which operates the e-
money business
Said Telco subsidiary has the primary
relationship with the account holders
Said Telco subsidiary is the E-money Issuer
(EMI)
Bank participation limited to “clearing”
Banks serve as cash-in/-out agents of the EMI
along with the EMI’s agents
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Nonbank-led Model
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Registering to the G-cash Service
1 User will 4 After
register in the verification,
system by 2 User will 3 User can go
the e-money
sending an SMS receive a to any Cash In
will be
of key reference no. as center to
registered on
information acknowledgement convert actual
the mobile
(name, address, cash to
phone with a
number) electronic
reference
money
number
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ATMs
Cash
IN
OUTLETS &
BANKS
Accredited
Partners
Mobile
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Phones
ATMs
Cash
OUT
OUTLETS &
Accredited BANKS
21 Partners
Presentation Outline
1. Background and Enabling Environment to E-
Money
2. E-money Mechanics
3. Philippine Experience on E-money
4. E-Money and E-Banking Regulation
5. Other Related Regulations
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Overview of Supervisory Framework
Technology Risk Outsourcing/ Consumer Business
Management Insourcing Protection Continuity
(Sec. X176 MORB) (Sec. X162 MORB) (Sec. X705 MORB) Management
E-Banking E-Money Money Transfer
Registration
(Sec. X701 MORB) (Circular 649)
(Sec. 4511N MORNBFI)
Banks/NBFIs Non-banks
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BSP Circular No. 649
9 March 2009
Guidelines governing the issuance of electronic
money (e-money) and the operations of electronic
money issuers (EMI) in the Philippines
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Classification and Approval Process
EMI-Banks – Sections X701 and X169 of the MORB
EMI-NBFI – Section X701 of the MORB, Section
4190Q/S/P/N of the MORNBFI
EMI-Others – Section 4511N of the MORNBFI
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EMI- Banks
Section X701 of the
Manual of Regulations for
Banks (MORB)
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Approval Process
Application
Conditional
Approval
Launch
Submission of
Documentary
Requirements
Monetary Board
Approval
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Conditional Approval
o Description of banking services to be offered
o Certification by Bank President or its equivalent that
Bank has:
- Adequate risk management process / Security policies
and procedures / System testing prior to implementation
/ Business continuity plan on electronic banking
channels and systems.
o Satisfactory financial condition, CAMELS rating of “3”
and overall risk assessment of generally acceptable
o Compliance with BSP rules and regulations
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Conditions for Final Approval
Continuing risk management oversight;
Adequate security controls (CIA);
Consumer protection;
AML compliance;
Advance BSP notification;
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EMI- Others
Section 5 of Circular 649
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Additional Provisions for EMI-Others
(Section 5 of Circular 649)
Stock corporation
Paid-up capital of P100 million
Engage in e-money issuance and incidental
business
Shall not engage in the extension of credit
100% liquidity cover
BSP access to systems and databases
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Requirements for all
EMIs
Section 4 of Circular 649
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Risk Management
(Section 4 of Circular 649)
Minimum risk management systems and controls
to include:
Internal controls
Properly designed and tested computer systems
Appropriate security policies and measures
Business continuity and recovery plans
Audit function
Compliance to AMLA regulations
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Consumer Protection
(Section 4 of Circular 649)
Adequate disclosure requirement
Redress mechanism to address complaints
Clear identification of issuer
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Presentation Outline
1. Background and Enabling Environment to E-
Money
2. E-money Mechanics
3. Philippine Experience on E-money
4. E-Money and E-Banking Regulation
5. Other Related Regulations
35
Outsourcing of Services by EMIs (Cir 704)
o Follow procedures under X162 MORB
o Certification by the Bank President that a due
diligence review had been conducted
o Consumer protection
o Pro-forma contract with EMNSP
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Other Provisions of Circular 704
o Accreditation process of CICO agents
o AML trainings and re-trainings every 2 years
o Annual operational and financial review
o Segregation of records/transactions of different
EMIs
o Documented and tested BCP with no significant
findings
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Other Related Regulations
Sections X162 of the MORB– Outsourcing of
Technology Systems and Processes
]
Section 4511N of the MORNBFI (Cir No. 471)
provides rules and regulations for the registration and
operations of foreign exchange dealers/money
changers and remittance agents
opens up opportunity for non-bank providers
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Other Related Regulations
Circular No. 511 (Technology Risk Management)
Risk Management focus on operational, compliance,
reputation and strategic risks associated with tech-related
products
Circular No. 542 CConsumer Protection
for E-Banking)
Consumer Protection focus on Board Oversight and Internal
Controls on security, authentication, customer
origination/verification, monitoring and reporting,
disclosure and complaint resolution
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Other Related Regulations
Circular No. 564 – Guidelines governing valid IDs
Circular No. 606 – Insourcing of services by a bank
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End of Presentation.
Website:
www.bsp.gov.ph
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