The Philippines has undergone a surge in growth over the past decade, with an average annual economic growth rate of 6.4% during 2010-2019, a significant reduction in poverty and an increase in real wages.1 Although the COVID-19 pandemic slowed this rapid progress with an economic contraction of 9.5% in 2020—the Philippines’ largest shrinkage on record2—the island country’s overall outlook remains optimistic. The International Monetary Fund (IMF) estimates that its GDP will expand by 5.4% in 2021 and 7% in 2022,3 although these forecasts might be downgraded if an outbreak of the highly infectious COVID-19 Delta variant drives further restrictions.
Digital transformation will be instrumental as the Philippines emerges from the health crisis and looks to expand its economy and achieve upper middle-income country status. The Philippines has lagged in its digital transformation compared to other Southeast Asian states, but a young and tech-savvy population, shifting consumer preferences and a spate of new regulations point toward promising growth for this emerging market. The COVID-19 pandemic drove increases in e-commerce and digital payments,4 and the Philippines has the world’s third-highest rate of cryptocurrency use.5
The Philippines’ 2021 digital agenda focuses on digital payments, the launch of a national Artificial Intelligence Roadmap, an exploration into a possible central bank digital currency (CBDC), the digitalization of government services, a national digital identity framework and updating the national cybersecurity framework. The Department of Information and Communications Technology (DICT) is working with the Australian government to improve the Philippines’ National Cybersecurity Plan.6 As the Philippines digitalizes, regulators have been eager to ensure that digitalization efforts encourage digital financial inclusion. Around 51.2 million Filipinos—71% of the population—are unbanked due to a lack of accessibility, information and resources.7 In April 2020, the central bank eased know-your-customer (KYC) requirements to expand access to banking services.8
Financial Regulatory Authorities
The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Philippines.
The National Privacy Commission (NPC) monitors compliance with the Data Privacy Act 2012.
The Securities and Exchange Commission (SEC) regulates and supervises the corporate sector, capital market participants, the securities and investment instruments market, and the investing public.
Policy, Laws and Regulations
Central Bank Investigating CBDCs, May 2021
BSP Governor Benjamin Diokno stated in a virtual briefing that the bank was preparing to conduct a study of the payments and settlement system “vis-a-vis its digitalization agenda to assess any gaps that may be addressed by a CBDC.”9 The development of a CBDC would align with financial inclusion goals per the Digital Payments Transformation Roadmap. Governor Diokno noted that, although the bank does not plan to issue a CBDC in the near future, it is monitoring developments in private digital currencies and CBDCs in global and domestic markets. His statements follow the April publication of a BSP report on the opportunities and challenges in CBDCs, CBDC technology and global developments. The report recommends that the central bank conduct further research into improvements to the domestic payments and settlement system, privately-issued digital currencies in the Philippines, and digital currencies—both privately-issued and CBDCs—across the globe. The report further recommends that the central bank focus on capacity building, technical assistance on a legal framework, the development of an implementation roadmap and possible collaboration with other central banks, financial institutions or international organizations.
Artificial Intelligence Roadmap, 05 May 2021
The Department of Trade and Industry (DTI) unveiled via Zoom a national Artificial Intelligence Roadmap, which includes 42 strategic tasks related to regulation, research and development, digitalization, infrastructure and workforce development.10 A key goal will be the establishment of the National Center for AI Research (N-CAIR), which will aim to encourage companies’ adoption of AI and help small businesses to boost productivity.
“The country’s AI roadmap will position the Philippines as an AI center of excellence and a big data processing and analytics hub providing high-value data analytics and AI services to the world,” said Trade Secretary Ramon Lopez.11
PhilSys National Digital ID System Goes Live, 30 April 2021
The Philippine Identification System (PhilSys) was established by the Philippine Identification System Act (Republic Act No. 11055). Signed into law by President Rodrigo Duterte in August 2018, PhilSys seeks to provide every citizen and permanent resident with valid proof of identification, and set the foundation for a digital economy. According to the National Economic and Development Authority (NEDA), PhilSys aims to promote financial inclusion, reduce fraud, give citizens more control over their personal data, facilitate the ease of doing business and make services more accessible.
The PhilSys ID, also known as the Philippine Identification Card (PhilID), includes thirteen data components, including name, photograph, birth date, birthplace, blood type and biometrics (fingerprints and iris scan). To participate in the system, citizens and permanent residents must first complete an online registration, then visit a registration center for the collection of biometric information and to open a bank account. Upon completion of the registration, PhilSys provides participants with their PhilID and two sets of numbers, the PhilSys Number (PSN) and PhilSys Card Number (PCN). The PSN is a permanent identification number containing their sensitive data, and the PCN is used for routine transactions. All citizens and permanent residents are required to participate in PhilSys. As of 03 July 2021, over a million PhilID cards had been issued, and almost 16.2 million Filipinos had completed the collection and enrollment of biometric data per step two of the registration process.12 As of June 2021, around 3.7 million bank accounts had been opened since the launch of the system.13
Law to Strengthen Anti-Money Laundering and Counter-Terrorist Financing Framework, 29 January 2021
President Rodrigo Duterte signed a law strengthening the national anti-money laundering and counter-terrorist financing framework in advance of a Financial Action Task Force (FATF) 01 February 2021 deadline. The law broadens the powers of the Anti-Money Laundering Council (AMLC), enabling it to apply for court summons and search and seizure warrants; impose financial sanctions pertaining to terrorist financing; and monitor transactions by Philippines-based online casino workers, as well as real-estate firms and brokers handling cash transactions of over PHP 7.5 million (approximately USD $160,000).14 The law also bolsters cooperation between the Philippines and transactional investigations and prosecutions regarding money laundering and terrorist financing. Before the passage of the law, the Philippines was at risk of being placed on FATF’s grey list, which would have subjected it to increased monitoring by the global financial watchdog.
Digital Payments Transformation Roadmap, 12 October 2020
The central bank unveiled the Digital Payments Transformation Roadmap 2020-2023, which outlines short-term strategic outcomes toward bolstering financial inclusion and the digital economy through the development of digital payment innovations. Key targets for 2023 include strengthening consumer preference for digital payments and promoting “more innovative and responsive digital financial services.” The central bank aims for 50% of retail payments to be conducted digitally with the introduction of more convenient payment options; 70% of Filipino adults to be financially included; the launch of PhilSys-based KYC to drive financial inclusion; and the “availability of a next generation payment and settlement system to facilitate real time processing of financial transactions.”
1. “Overview Philippines.” World Bank, 07 April 2021. https://www.worldbank.org/en/country/philippines/overview.
2. “Philippine economy shrank at record pace in 2020, outlook gloomy.” Al Jazeera, 28 January 2021. https://www.aljazeera.com/economy/2021/1/28/philippine-economy-shrank-at-record-pace-in-2020-outlook-gloomy.
3. “IMF Staff Completes Virtual 2021 Article IV Mission to the Philippines.” International Monetary Fund, 15 June 2021. https://www.imf.org/en/News/Articles/2021/06/15/pr21177-imf-staff-completes-virtual-2021-article-iv-mission-to-the-philippines.
4. Lim, Jamilah. “Are digital banking entrants in Philippines a catalyst for a digital economy boom?” Tech Wire Asia, 09 June 2021. https://techwireasia.com/2021/06/are-digital-banking-entrants-in-philippines-a-catalyst-for-a-digital-economy-boom/.
5. England, Joanna. “Cryptocurrency to become mainstream in the Philippines.” FinTech Magazine, 23 March 2021. https://fintechmagazine.com/digital-payments/cryptocurrency-become-mainstream-philippines.
6. Marasigan, Lorenz S. “PHL partners with Australian institute to enhance National Cybersecurity Plan.” Business Mirror, 22 June 2021. https://businessmirror.com.ph/2021/06/22/phl-partners-with-australian-institute-to-enhance-national-cybersecurity-plan/.
7. “Why Filipinos Remain Unbanked: Addressing Banking Challenges In The Philippines.” PearlPay, 01 February 2021. https://pearlpay.com/why-filipinos-remain-unbanked/.
8. Abdullah, Saliha Naila A. “BSP Relaxes KYC Requirements to Facilitate Access to Financial Services.” MFBR, 20 April 2020. http://mfbr.com.ph/2020/04/20/bsp-relaxes-kyc-requirements-to-facilitate-access-to-financial-services/.
9. Caraballo, Mayvelin U. “BSP looks deeper into CBDC viability.” The Manila Times, 09 May 2021. https://www.manilatimes.net/2021/05/09/business/sunday-business/bsp-looks-deeper-into-cbdc-viability/871488.
10. “Philippines plans to establish artificial intelligence research center.” Business World, 06 May 2021. https://www.bworldonline.com/philippines-plans-to-establish-artificial-intelligence-research-center/.
11. “DTI to launch National Artificial Intelligence Roadmap.” Department of Trade and Industry. https://www.dti.gov.ph/archives/national-artificial-intelligence-roadmap/.
12. Burt, Chris. “Digital ID rollout passes 1M cards in Philippines.” Biometric Update, 06 July 2021. https://www.biometricupdate.com/202107/digital-id-rollout-passes-1m-cards-in-philippines.
13. Gatpolintan, Leslie. “3.7M PhilSys registrants now have bank accounts.” Philippine News Agency, 23 June 2021. https://www.pna.gov.ph/articles/1144760.
14. “Philippines' Duterte tightens anti-money laundering rules to avoid `grey list'.” Reuters, 30 January 2021. https://www.reuters.com/article/us-philippines-moneylaundering/philippines-duterte-tightens-anti-money-laundering-rules-to-avoid-grey-list-idUSKBN29Z0IJ.
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Last updated: November 2021