Imagine finally arriving in Baguio City, the country’s summer capital, and while shopping for ‘pasalubong‘ for your loved ones, you realize that you have forgotten to bring enough cash.
What to do? Try using an e-wallet.
Apparently, in the city’s public market, a tourist destination in itself, cash has just been made optional so you can now also shop in the area using digital payment apps like GCash or PayMaya.
This was made possible after the Bangko Sentral ng Pilipinas (BSP) decided to roll out its campaign to popularize cashless payments in the grassroots economy, which was piloted last August 14 at the tourist-friendly Baguio City Public Market.
The project, dubbed “PalengQR,” is meant to encourage the average vendor, the shopkeeper, and public utility vehicle drivers to transact with their customers or passengers through digital payment platforms.
Building a digital payments ecosystem
The BSP said that this national program is part of the banking sector’s process for constructing a “digital payments ecosystem.”
“We are hoping and praying that it [PalengQR] will spread throughout the Philippines and will reach the sidewalk vendors, the tricycle drivers, and the jeepney drivers,” BSP Governor Felipe Medalla said during the launch of the program at Malcolm Square in Baguio. The launch was likewise attended by Bernadette Romulo Puyat, BSP Deputy Governor, and Baguio City officials led by Mayor Benjamin Magalong.
“This is important. I noticed sometimes when I took the jeep that the driver’s wife sits in the front [to collect their passengers’ fare]. That was not too wise. They lose one revenue seat. Then, I found out she was auditing the husband,” joked Medalla, a former dean of the University of the Philippines School of Economics. “With PalengQR, the wife won’t need to ride along anymore. She can just check her husband’s records [for the day] online,” he added.
Credit scoring system to solve stumbling blocks for MSMEs
The digital payments infrastructure also solves many stumbling blocks faced by micro and small business owners, Medalla added.
“Imagine a world where you no longer need collateral. The biggest thing that holds back the poor is a chicken and egg question. Since you don’t have a property for collateral, that means you can’t take out a loan. But because you can’t acquire credit, you won’t have property,” said Medalla, who also served as the socioeconomic planning secretary of former President Joseph Estrada in the late 1990s.
“To break this really very bad negative cycle,” the BSP chief further explained, “we are now developing a credit scoring system with the Japan International Cooperation Agency, which would allow us to calculate an individual’s credit score.”
A credit score, which would soon be used globally by the financial sector, shall represent an individual’s “creditworthiness” based on his monetary behavior or his pattern of expenditures and how well he settles his obligations.
Merchants protected by the BSP digital system could allow their personal banks to look at their records, and even without any collateral, the credit scores alone will help convince the banks to approve their loan applications.
Baguio City makes the ‘Smart’ move
Citing Magalong’s initiative to set up the Baguio Smart City Project, Medalla said that government finance experts are actually testing the BSP’s PalengQR Philippines program “in the right city.”
The Smart City program is a digital automation system that utilizes artificial intelligence to manage peace and order, traffic, disaster surveillance, as well as health, social work, and other public services. Its digital infrastructure will be powered by a Baguio Broadband Network to be provided by former senator and IT secretary Gregorio Honasan II. As of this writing, the city’s digital infrastructure is still under construction.
Many in the city’s business sector have adopted cashless transactions during the lockdowns due to the coronavirus pandemic.
For his part, Baguio City Mayor Magalong said, “What we are doing is a big idea that (hopefully) can bring unprecedented change. We have entered the age of innovation and we have to adapt to the fast-paced world of digital transformation. This pandemic has just shown the importance of going digital.”