By: Jay-r C. Ipac
In line with its thrust of ensuring the safety, efficiency, and reliability of payment systems in support of inclusive economic growth, the Philippine central bank has recently approved a circular requiring payment service providers (PSP), which include banks and non-bank electronic money issuers, to adopt a National QR code standard. This standard would have to be approved by the Philippine Payments Management, Inc. (PPMI), which is the Payment System Management Body in the Philippines.
A QR (Quick Response) code is machine-readable code consisting of an array of black and white squares, typically used for storing URLs or other information for reading by the camera on a smartphone.[1] The central bank required the PPMI to consider the following in approving the National QR Code standard: interoperability, simplicity and accessibility.
The central bank has taken into account the emergence of QR technology as the most convenient and cost efficient means of moving funds from one account to another, and the use of interoperable QR Codes as an alternative to the traditional debit and credit cards. In line with the growth of global retail e-commerce at US$ 3.535 trillion this year and projected to reach US$6,542 trillion in 2023,[2] the central bank also required the National QR Code standard to be aligned with globally recognized standards to support interoperability not only on a domestic but also on broader regional or global scale.
On this score, with the meteoric rise of two dominant mobile payment platforms in China (Wechat and Alipay) and its efforts at international expansion, the move to a National QR code standard is an interesting response to international developments. But this international component is only half of the picture. The central bank’s move is in fact backed up by numbers domestically. Based on central bank’s findings, the number of active e-money wallets in the Philippines rose by 132.7% from 2.2 million in 2017 to 5 million in 2018, while the total e-money cards linked to e-money also grew from 24.9 million to 28 million or a 12.5% increase. This totals 33 million e-money accounts in 2018. This is very significant compared to the number of the decades old debit cards, which stood at 38.7 million in 2017 to 39.5 million in 2018 (or an increase of only 2%) and credit cards, which stood at 8 million in 2017 to 9.4 million in 2018 (or just an 18% increase).[3]
E-money is a monetary value electronically stored in convenient payment instruments that consumers can use to buy or pay for goods and services, to transfer or remit funds, and/or to withdraw funds. E-money instruments include cash cards, e-wallets accessible via mobile phones or other access device, stored value cards, and other similar products.[4] In a study conducted by Aaron Klein at the Brookings Institution on China’s QR code payment system, he observed that “[a]ll the merchant has to produce is a bar code that can printed on a simple piece of paper. The consumer can leverage the smartphone to both scan the QR code and go-online to process the transaction. This lowers merchant costs even further, particularly for those who do not have easy access to telecommunications. It even allows for person-to-person transactions for folks who have codes but not smartphones.” The surge in the use of electronic wallets in the Philippines, together with other factors (such as high mobile phone user penetration, mobile internet usage at an average of more than four hours daily[5], and a large portion of the population being unbanked) make ripe the adoption of a national QR Code standard for payments in the Philippines.
To build public trust, the central bank also required PSPs to give utmost priority to the safety of the payers and the payees making use of QR-enabled payment and financial services. While cases involving privacy and security issues in QR technology are not common, it should be noted that the Philippines recorded a significant increase in cybercrime in 2018.[6] Because QR codes can be generated easily and for free, the required adoption of QR code by PSPs could potentially lead to its adoption in other commercial activities, where scammers could find a fertile ground to commit cyber-crimes. Hence, continued and coordinated efforts by and among concerned government agencies to increase public awareness and to launch prevention campaigns against cybercrime are also key in the central bank’s laudable initiative.
Jay-r C. Ipac is a senior associate at DivinaLaw–one of the leading full-service firms in the Philippines. He is also an Intellectual Property and Technology Law and Policy professor at the University of Sto. Tomas and San Sebastian-Recoletos College of Law.
[1] https://www.lexico.com/en/definition/qr_code
[2] https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
[3] http://www.bsp.gov.ph/downloads/Publications/2019/FIDashboard_2Q2019.pdf Late last year, Singapore-based startup decacorn Grab also joined the Philippine mobile payments market by securing an e-money license from the Philippine’s central bank.
[4] Circular No. 649 Series of 2009.
[5]https://www.philstar.com/business/technology/2019/01/31/1889736/filipinos-are-worlds-heaviest-internet-users-2018-report-says
[6] https://www.philstar.com/headlines/2019/03/29/1905544/cybercrimes-80-2018
