Republic of the Philippines
House of Representatives |
Quezon City es

NINETEENTH CONGRESS

First Regular Session

358

House Bill No.

EXPLANATORY NOTE

This Bill seeks to adopt the use of electronic money as one of the medium of
exchanges across the country.

As part of our move to transition into the “new normal’ in the midst of the current
global pandemic, electronic payments of essential goods and services is a crucial
element in flattening the COVID-19 curve since handling of cash itself is a potential
transmitter of the virus. Furthermore, electronic money transactions will no longer
require the ordinary Filipino, specially the elderly who are classified as high-risk, to
leave the safety of their homes to buy goods, pay utility bills, remit money, or address
other household needs, which may all be done online.

Moreover, switching to digital and cashless payments brings convenience,
ensures transparency and safety, saves time, and offers speedy value transfers. The
adoption of digital payments also affords more efficient service delivery and at the
same time entails lower operating costs. It increases financial inclusion to support
broad-based economic development that can contribute to inclusive growth in the
country.

Support for this bill is earnestly requested from my colleagues.

MARIA ANGELA S. GARCIA
Thi istrict, Bataan


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Republic of the Philippines
House of Representatives
Quezon City
NINETEENTH CONGRESS

First Regular Session
358

House Bill No.

Introduced by Representative Maria Angela S. Garcia

AN ACT
PROMOTING THE ADOPTION OF DIGITAL PAYMENTS FOR FINANCIAL
TRANSACTIONS OF THE GOVERNMENT AND ALL MERCHANTS AND FOR
OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the "Use of Digital
Payments Act."

SEC. 2. Declaration of Policy. - The State recognizes the vital role of
information and communications technology particularly financial technology, towards
financial inclusion advancement and nation-building. The State also recognizes the
need of promoting ease of doing business and efficient delivery of goods and services
to the general public. Towards this end, the State shall promote financial inclusion
through the use of safe, secure, and efficient digital payments. In various transactions
of the government and the public—particularly for payments to government, and
government disbursements to the public, which includes but is not limited to payments:
to or by private institutions, merchants, and beneficiaries, the state shall optimize the
use of financial technologies and innovative payment systems for financial
transactions and to strengthen financial inclusion. In so doing, the State shall
encourage and facilitate the adoption of digital payments in a technology-neutral


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mann

er, where one technology is not unreasonably favored or given undue advantage

over another.

SEC. 3. Objective. - This Act aims to facilitate transactions, arrangements, or

exchanges of goods and services by promoting the universal use of safe, affordable,

and efficient digital payments in financial transactions of the government and the

gener:

mean:

al public.

SEC. 4. Definition of Terms. - As used in this Act, the following terms shall

“Access device" refers to any card, plate, code, account number, electronic
serial number, personal identification number, mobile device, or other
information and communications technology service, equipment or
Instrumental Identifier, or other means of account access that can be used
to obtain money, goods, services, or any other thing of value, or to initiate a
transfer of funds in electronic form;

“Account-based disbursement” refers to the disbursement of funds such as

salaries, wages, allowances, and social benefits, among others, directly into

the transaction account of the intended recipient held in any Bangko Sentral
1g Pilipinas (BSP)-supervised entity as chosen and specified by the intended
recipient;

iii, “Basic deposit account (BDA)” refers to the deposit product offered by banks
as defined under the BSP Manual of Regulations for Banks and its
implementing guidelines;

iv. “Digital collection” refers to a mode of payment wherein businesses and

citizens make payments to the government, including but not limited to taxes,

fees, and tolls, using a digital device such as mobile phone, point of sale, or
computer. Payments can be made with bank transfers, electronic money,

and payment cards including credit, debit, prepaid, or stored-value cards,
among others;

v. ‘Digital disbursement” refers to a mode of payment whereby disbursement
of money or equivalent electronic representations of legal tender, for
purposes of paying government expenditures, is made by crediting the target
recipient's transaction account through advice to debit or electronic fund

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vil.

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transfer facilitated by any government agency or instrumentality through their
respective servicing bank;

"Digital Payments" refers to monetary payment transactions between two
parties through a digital payment instrument in which both the payer and the
payee use an electronic channel;

“Electronic fund transfer’ refers to a transfer of funds between two
transaction accounts in the same or different BSP-supervised financial
institutions which are initiated and received using electronic devices and
channels to transmit payment instructions;

“Electronic money (e-money)" refers to electronically-stored monetary value
which is issued in accordance with the BSP Manual of Regulations for Banks
and the manual of regulations for non-bank financial institutions;

“Financial inclusion” refers to the state wherein there is effective access to a
wide range of financial products and services for all Filipinos;

. “Government Servicing Payment Service Provider (PSP)” refers to bank and

non-bank PSPs authorized to accept government funds and perform
payment services on behalf of government entities. This includes authorized
government depository banks (AGDBS) as defined by Department of
Finance (DOF) regulations;

“Information security standards” refers to standards which aim to protect and
secure the confidentiality, integrity, availability, authenticity, and non-
repudiation of information and the data privacy of users of any digital
payment platforms and other parties involved therein;

“Merchant” refers to a person or entity engaged in buying and selling
merchandise, purchasing of services, skills, or expertise, and leasing of
goods and services;

“Micro-payment transactions” refers to low-value payments including but not
limited to payments to sari-sari store owners, wet market vendors, as well as
tricycle and jeepney drivers, the actual thresholds of which shall be
determined by the BSP, pursuant to the objectives of this Act;

“Payment Service Provider (PSP)” refers to an entity, such as bank or non-
bank electronic money issuer, that provides payment services to end-users,
such as consumers, merchants, and billers, including government

institutions;


xv. “Payment system” refers to the set of payment instruments, processes,
procedures and participants that ensures the circulation of money or
movement of funds, which comply with the requirements set forth under
Republic Act No. 11127 or the National Payment System Act;

“Transaction Account” refers to an account, such as but not limited to a BDA,
or e-money account held with a BSP-supervised financial institution that can
be used to store, send, and receive funds.

wi

SEC. 5. Adoption of Digital Payments for Government Disbursements. —
All government entities, including but not limited to national government agencies
(NGAs), foreign-based government agencies, all government corporations, local
government units (LGUs), State Universities and Colleges (SUCs), and local
universities and colleges (LUCs), are hereby mandated to utilize safe, and efficient
digital disbursement in the payment of goods, services, and other disbursements
including but not limited to cash assistance and payments of salaries, wages,
allowances, and honoraria of its employees, whatever nature of appointment
Government entities shall be allowed to disburse funds directly into the recipient's or
beneficiary's transaction account held in government or private financial institutions
without the need for special arrangement with each of these financial institutions. For
this purpose, said government entities may use the automatic debit arrangement,
interoperable electronic fund transfer or any other appropriate facility of its government
servicing PSP.

Accountable officers of the government entities shall observe due diligence in
ensuring the accuracy of the recipient's or beneficiary's identity. Uses of government
funds through direct crediting shall remain transparent to state auditors.

Government entities shall be responsible for preparing the payment instruction
with the necessary details, including the recipient's or beneficiary's name, transaction
account details, and amount, among others, only after proper authorization in
accordance with established accounting and auditing rules and regulations.

The government servicing PSP shall carry out the payment instruction and
submit the verified list of successful and failed fund transfers and other relevant details
to the government entity disbursing the fund. Subject to agreement with the
government entity, the government servicing PSP may collect fees from the
government entity for the electronic fund transfer services.

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In case of unsuccessful digital disbursement, there shall be a recovery
mechanism that will ensure the continuity of delivery of payment services: Provided,
That in cases of calamities or other emergencies, where payments through digital
means may be affected, non-digital payout channels may be explored.

SEC. 6. Adoption of Digital Payments for Government Collections. — All
government entities, including but not limited to national government agencies
(NGAs), foreign-based government agencies, all government corporations, local
government units (LGUs), State Universities and Colleges (SUCs), and local
universities and colleges (LUCs), shall offer digital collection as a mode, in addition to
acceptance of cash payment, for the collection of taxes, fees, tolls, imposts and other
revenues, including non-income collections and receipts.

Government entities shall utilize secure payment processing solutions to
ensure acceptance of various digital payment methods. For this purpose, said
government entities may engage the services of established PSPs: Provided, That
government entities shall avail only of interoperable digital payment solutions.
Notwithstanding any law to the contrary, partner PSP of a government entity shall not
be limited to government servicing banks.

SEC. 7. Adoption of Interoperable Digital Payment Solutions. - The BSP
shall implement initiatives that aim to accelerate the adoption by all PSPs of
interoperable digital payment technologies and appropriate standards thereof, such as
but not limited to the National Quick Response (QR) Code Standard meant to hasten
the interoperability of QR-driven payment services and eliminate the need for
merchants and clients to maintain several accounts.

In addition, NGAs, government corporations, SUCs, LGUs and merchants shall
undertake measures to promote the adoption of the Open Finance Framework in
accordance with the guidelines set forth under the applicable BSP rules and
regulations which will enable sharing of customer-permissioned financial data and
foster adherence to data security and privacy standards.

The digital payment solutions adopted by government entities shall allow for
real-time receipt of funds by the recipient government entity, immediate issuance of
electronic invoices and/or official receipts to payors, regular audit reports, and other
technical features that will aid in the fulfillment of the objectives of this Act. To ensure

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that these digital payment solutions adhere to applicable international standards on
information security, data privacy, and electronic data interchange between financial
institutions, among others, government entities shall avail of digital payment solutions
under the BSP’s National Retail Payment System Framework.

Existing agreements between government entities and PSPs shall be honored
until the respective terms thereof expire: Provided, That parties concerned shall
‘endeavor, within one year from the effectivity of this Act, to implement amendments to
such agreements with intention to remove provisions detrimental to public interest. In
all instances, collection and payment schemes that prevent transparency and
accountability over public funds, as well as arrangements disadvantageous to the
government, shall be discontinued.

There shall be a technical working group (TWG) composed of the Commission
‘on Audit (COA), Department of Budget and Management (DBM), Department of
Finance (DOF), Bureau of the Treasury (BTr), Bureau of Internal Revenue (BIR), the
Government Procurement Policy Board, and other relevant agencies that will provide
guidance and promote cost-efficiency and transparency in procurement of digital
payment solutions by government entities. Consistent with the respective mandates
of the member-agencies, and in coordination with the COA, the TWG shall have the
following powers and functions:

a) Oversee and monitor the procurement of digital payment solutions by
government entities and ensure that the same is in accordance with existing
laws, rules and regulations;

b)

Consider the formulation of standard terms and conditions for PSPs, in
consultation with the BSP and COA. Pursuant to its mandate, the GPPB
may also issue specific procurement guidelines for the engagement of
PSPs;

Resolve issues relative to the implementation of this Act, without prejudice
to the individual member-agencies resolving such concerns pursuant to

°)

their respective mandates;
Call on any department, agency or office under the Executive Branch for the
effective implementation of this Act;, and,

d)

e) Perform such other function pursuant to the fulfillment of the objectives of
this Act.


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SEC. 8. Establishment of a Government Payment Gateway. — The BSP, in
consultation with the DOF, DBM, COA, Department of Information and
Communications Technology (DICT), BIR, BUREAU OF CUSTOMS (BOC), Bureau
of the Treasury (BTR), digital banking experts, academe, and other appropriate public
sector and banking industry stakeholders, may cause the establishment of a
government payment gateway through which all government entities may process
digital payments made to them through PSPs, websites, mobile phone applications,
or other access devices.

The government payment gateway shall allow for real-time settlement of
accounts and receipt of funds by the recipient government entity, immediate issuance
of electronic invoices and/or official receipts to payors, regular audit reports,
interoperability between digital payment technologies, and other technical features
that will aid in the fulfillment of the objectives of this Act. Said gateway shall adhere to
relevant international standards on information security, data privacy, and electronic
data interchange between financial institutions.

SEC. 9. Digital Payment Capability of Merchants. - To accelerate the
adoption of digital payment, LGUs shall, by ordinance, encourage and grant monetary
and non-monetary incentives to merchants within their localities to establish and/or
outsource arrangements and/or mechanisms that would enable them to receive
payments from clients and make payments to creditors and suppliers using digital
channels,

LGUs shall ensure that merchants in their jurisdictions have access to appropriate
digital payment solutions and have the capacity to effectively use the same, with due
consideration to small and micro-merchants, including, but not limited to, market
vendors, tricycle operators and food stalls. The LGU shall extend assistance to small
and micro merchants to facilitate their adoption of digital transaction capability. The
BSP, Department of Trade and Industry (DTI), DILG, AND DICT shall provide capacity
building for the NGAs, government corporations, SUCs, LGUs, and merchants on the
use of digital payments.

SEC. 10. Promotion of Digital Payment Transactions. — To optimize the
benefits of digital payments, scale up financial inclusion, and promote sustainability,
all government entities shall prioritize the use of safe and efficient digital payment in

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their financial transactions.

All government entities covered by this Act shall also adopt a comprehensive
incentive framework for selected financial transactions to encourage the use of digital
payments. LGUs shall, likewise, grant relevant incentives for merchants providing
efficient digital payment systems.

The BSP, in coordination with relevant stakeholders, shall promote measures on
financial and digital literacy, and consumer protection to strengthen the public’s trust
in digital payment transactions.

To enable the general public to adopt digital payments, micro-payment
transactions shall be subject to graduated pricing or be rendered free of any service
charge as determined by the BSP in consultation with the merchants and the payment
services industry, as may be represented by the BSP-accredited payment system
management body.

The DICT shall implement measures to further enhance the availability,
accessibility, reliability, and cost-efficiency of internet services to support the
Government's program on the digitalization of financial transactions.

Sec. 11. Multi-Year Roadmap for Digital Payment Adoption - The BSP, in
collaboration with relevant government entities, shall prepare and regularly update a
multi-year roadmap on digital payments to ensure the timely implementation and
optimal realization of the objectives of this Act.

This Multi-year Roadmap shall be aligned with the e-government masterplan
formulated by the DICT in consultation with other key government agencies, and shall,
among others, set targets and outcomes, such as but not limited to the widespread
adoption of digital payments by merchants, for a minimum period of five (5) years,
and include strategic public and private interventions and possible government
programs and projects. The roadmap shall be subject to annual review.

SEC. 12. Transitory Provision. - Government entities shall be responsible for
ensuring proper transition of their respective agency's disbursement and collection
procedures and policies to digital payments.

Digital disbursement shall be implemented within six (6) months from the issuance
of the implementing rules and regulations (IRR) of this Act.

For the implementation of digital collections, a tiered transition period not

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exceeding three (3) years from the issuance of the IRR shall apply. The tiering
guidelines, to be established by the TWG as part of the IRR, shall reflect differentiated
transition timeframes based on the readiness and capability of the government
entities. Government entities deemed capable and ready based on defined criteria
shall be required to implement digital collection within a shorter transition period while
others may be allowed a longer transition period but not to exceed three (3) years.

SEC. 13. Information Security and Data Privacy. - All data information and
information and communications technology systems and networks, used for digital
payments pursuant to the objectives of this Act shall be secured and protected at all
times. The DICT and the National Privacy Commission shall, in consultation with the
BSP, define and prescribe the minimum information security standards for compliance
of PSPs who are covered by this Act and are not under the oversight and regulatory
authority of the BSP.

SEC. 14. Obligations of Payment Systems Providers. — In line with the declared

policy in this Act, all PSPs shall have the following obligations:

a) Integrate security and data privacy by design and by default in the development
stage of the payment systems;

b) Process personal and sensitive personal information in the system in
accordance with any of the criteria for lawful processing provided for under
relevant laws, rules and regulations;

°)

Implement reasonable and appropriate organizational, physical, and technical
security measures for the protection of personal data and uphold the rights of
data subjects;

i)

Provide reasonable and timely assistance to NGAs, government corporations,
LGUs, SUCs, and/or merchants, in accordance with relevant rules and
regulations, to enable them to respond to a request from clients to exercise any
of their rights and any other correspondence, inquiry or complaint received from
a client or other third party in connection with the processing of the personal
data in the payment system;

e)

The PSP performing the function of collection of money and/or payment of

transaction on behalf of the government agency shall, to the extent necessary,

cooperate with the COA for the examination, audit, and settlement of all
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accounts pertaining to the revenue and receipts, and expenditures or uses of
funds of all NGAs, government corporations, SUCs, and LGUs. The PSP shall
allow COA to perform its audit procedures and to determine whether collections
are complete and use of funds are authorized;

f) Comply with the requirements indicated in the standard terms of reference or
standard minimum terms and conditions that may be issued by the TWG.

SEC. 15. Penalties and Sanctions. — Without prejudice to the penalties and
‘sanctions provided in Republic Act No. 11127 or “The National Payment Systems Act"
and other laws, whenever any person or entity willfully violates this Act, rule or
regulation, directives or orders duly promulgated by the BSP pursuant hereto, the
person or persons responsible for such violation shall be punished by a fine of not less
than Two hundred thousand pesos (P200,000.00) or more than Two million pesos
(P2,000,000.00) or by imprisonment of not less than two (2) years nor more than ten
(10) years, or both, at the discretion of the court.

SEC. 16. Interpretation. — Nothing in this Act shall be construed to exempt any
government funds in the possession of private entities from the constitutional authority
and duty of the COA to examine, audit, and settle all accounts pertaining to the
revenue and receipts of, and expenditures or uses of funds and property, owned or
held in trust by, or pertaining to, the government. All digital payments involving
government transactions under this Act shall be subject to post-audit of the COA.
Accordingly, the COA shall promulgate the pertinent rules and regulations for all
transactions covered by this Act.

SEC. 17. Appropriations. ~ Government entities may be allowed to include in
their respective budgets amounts that will cover the reasonable costs of establishing
and maintaining the infrastructure, system and/or processes adjustments as well as
transaction fees that they may shoulder in connection with the implementation of digital
payments, including but not limited to, merchant discount rate, processing fees, cash-
out fees and administration fees: Provided, That the release of said budget may be
conditioned on the actual adoption of digital payments by the concerned government
entities.

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Government entities may also top-up cash assistance with a standard amount
to cover any transaction fees that may be incurred by recipients or beneficiaries when
claiming or withdrawing said cash assistance from their respective transaction
accounts.

The amount necessary for the implementation of the provisions of this Act shall
be taken from the current year's budgets of the NGAs, government corporations,
SUCs and LGUs. Thereafter, such sums as may be necessary for the continued
implementation of the Act shall be incorporated in the annual General Appropriations
Act, corporate operating budget, or appropriation ordinance, as the case may be.

SEC. 18. Implementing Rules and Regulations. - The BSP, in coordination with
the DBM, COA, DOF, BTR, BIR, DICT, DOST, DILG, DTI, and other relevant agencies,
shall promulgate the rules and regulations implementing the provisions of this Act
within ninety (90) days from its effectivity.

SEC. 19. Separability Clause. — If for any reason, any part or provision of this Act
is declared invalid or unconstitutional, the remaining parts or provisions not affected
shall remain in full force and effect.

SEC. 20. Repealing Clause. - All laws, presidential decrees, executive orders,
rules and regulations contrary to or inconsistent with the provisions of this Act are

hereby repealed or modified accordingly.

SEC. 21. Effectivity. - This Act shall take effect fifteen (15) days after its
Publication in the Official Gazette or in a newspaper of national circulation.

Approved,

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