Digital Payments Act

sentale Mitice of the Secretary TWENTIETH CONGRESS OF THE 25 OCT 13 P1:18 REPUBLIC OF THE PHILIPPINES First Regular Session ) RECEIVED BY: SENATE Senate Bill No. 1454 Introduced by Senator Erwin T. Tulfo AN ACT PROMOTING THE ADOPTION OF DIGITAL PAYMENTS FOR FINANCIAL TRANSACTIONS OF THE GOVERNMENT AND ALL MERCHANTS AND FOR OTHER PURPOSES EXPLANATORY NOTE The COVID-19 pandemic has highlighted the critical importance of digital payments in ensuring , the continuity of economic activities, government services, and financial transactions across various sectors. According to the 2024 e-payments measurement conducted by the Bangko Sentral ng Pilipinas (BSP), digital retail payments accounted for 57.4% of total transaction volume. This marks a significant year on-year increase of 4.6 percentage points, highlighting the continued momentum in the country's shift toward electronic payment channels. On May 12, 2022, Executive Order No. 170 was issued directing all covered agencies to utilize safe and efficient digital disbursement methods in the payment of goods, services and other disbursements including the distribution of financial assistance, payment of salaries, wages, allowances and other compensation to employees.

This bill seeks to institutionalize the adoption of digital payments in government and private transactions to promote financial inclusion, ease of doing business, and efficient public service delivery. It mandates all government entities to utilize digital payment systems for collections and disbursements and directs the Bangko Sentral ng Pilipinas (BSP), in coordination with the DICT and other agencies, to develop a Multi-Year Roadmap for Digital Payment Adoption. In view of the foregoing, the immediate passage of this measure is earnestly sought. ERWIN T. TULFO

Binale Difice of the Secretary TWENTIETH CONGRESS OF THE OCT 13/P1:18 REPUBLIC OF THE PHILIPPINES First Regular Session ) RECEIVED BY: SENATE Senate Bill No. 1454 Introduced by Senator Erwin T. Tulfo 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 the House of Representatives of the Philippines in Congress assembled:

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

2 Payments Act".

SEC. 2. Declaration of Policy. - The State recognizes the vital role

of information and communications technology, particularly financial technology and digital payments, in advancing financial inclusion and nation-building. It likewise recognizes the need to promote ease of doing business and ensure the efficient delivery of goods and services to the general public. Towards this end, the State shall promote financial inclusion • 12 through the use of safe, secure, reliable, and efficient digital payment systems in various transactions involving the public and both government and private institutions.

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

arrangements, or exchanges of goods and services by promoting the universal use of safe, secure, affordable, reliable, and efficient digital payments in financial transactions of the government and the general public.

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

terms shall mean: a. 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 ng Pilipinas (BSP)-supervised entity as chosen and specified by the intended recipient; b. Digital Collection refers to a mode of payment wherein businesses and individuals make payments to the government, including but not limited to taxes, fees, and tolls, using a digital device such as a 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; c. 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 transfer facilitated by any government agency or instrumentality through their respective servicing bank; d. Digital Payment refers to monetary payment transactions between two parties through a digital payment instrument by which both the payor and the payee use an electronic channel;

e. 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; f. Financial Inclusion refers to the state wherein there is effective access to a wide range of financial products and services for all Filipinos; g. Government Servicing Payment Service Provider 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 the Department of Finance (DOF) regulations; h. Information Security Standards refers to standards that 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; i. 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; j. 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; k. Payment Service Provider (PSP) refers to an entity, such as a bank or non-bank electronic money issuer, that provides

payment services to end-users, such as consumers, merchants, and billers, including government institutions; I. Payment System refers to the set of payment instruments, processes, procedures and participants that ensure 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;

SEC. 5. Digital Payment for Government Disbursements. - All

government entities, including but not limited to national government agencies (NGAs), foreign-based government agencies, government corporations, local government units (LGUs), State Universities and Colleges (SUCs), and local universities and colleges (LUCs), are hereby mandated to utilize safe, secure, reliable and efficient digital disbursement in the payment of goods, services and other disbursements including but not limited to cash assistance and payment 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 arrangements 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. Use 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. In case of successful 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 pay- out channels may be explored.

SEC. 6. Digital Payments for Government Collections. - All

government entities, including but not limited to NGAs, foreign-based government agencies, all government corporations, LGUs, SUCs, and 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, a partner PSP of a government entity shall not be limited to government servicing banks.

SEC. 7. 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 the merchants and clients to maintain several accounts. In addition, NGAs, government corporations, SUCs, LUCs, 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 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 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 the intention of removing provisions detrimental to public interest. In all instances, collection and payment schemes that prevent transparency and as well as accountability over public funds, arrangements disadvantageous to the governments, shall be discontinued.

SEC. 8. Establishment of a Government Payment Gateway. - The

BSP, in consultation with the DOF, DBM, COA, DICT, digital banking experts, academe and other appropriate 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. The 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 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 LGUs shall extend assistance to small and micro- merchants to facilitate their adoption of digital transaction capability.

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, secure, reliable and efficient digital payment in 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. 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

Bangko Sentral ng Pilipinas (BSP), in coordination with relevant government agencies, shall formulate and regularly update a Multi-Year Roadmap for Digital Payment Adoption to ensure the timely implementation and effective realization of the objectives of this Act. Subject to annual review and periodic evaluation, the Roadmap shall be aligned with the E-Government Masterplan formulated by the Department of Information and Communications Technology (DICT), in consultation with other concerned government agencies. It shall, among others, set measurable targets and outcomes for a minimum period of five (5) years, including but not limited to the widespread adoption of digital payments by merchants, as well as the identification of strategic public and private sector interventions, programs, and projects necessary to achieve these goals. The BSP shall annually submit to Congress a report on the implementation of the Multi-Year Roadmap, together with all subsequent updates, for review and appropriate recommendation.

SEC. 12. Information Security and Data Privacy. - All data

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 (NPC) shall, in consultation with the BSP, define and prescribe the minimum information security standards for compliance of PSPs covered by this Act.

SEC. 13. Obligations of Payment Systems Providers. - 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; c. Implement reasonable and appropriate organizational, physical, and technical security measures for the protection of personal data and uphold the rights of data subjects; d. Provide reasonable and timely assistance to NGAs, government corporations, LCDs, SUCs, LUCs, 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 accounts pertaining to the revenue and receipts, and expenditures or uses of funds of all NGAs, government corporations, SUCs, LUCs, and LGUs. The PSP shall allow COA to perform its audit procedures and to determine whether collections are complete, and the use of funds are authorized; and f. Comply with the requirements indicated in the standard terms of reference or standard minimum terms and conditions that may be issued by the BSP.

SEC. 14. Penalties and Sanctions. - Without prejudice to the

penalties and sanctions provided under Republic Act No. 11127, otherwise known as the "National Payment Systems Act," and other existing laws, any person or entity that willfully violates the provisions of this Act shall be liable to a fine of not less than Two Hundred Thousand Pesos (₽200,000.00) but not more than Two Million Pesos 7 (₽2,000,000.00), or an imprisonment of not less than two (2) years but not more than ten (10) years, or both, at the discretion of the court.

SEC. 15. 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.

SEC. 16. Appropriations. - 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, LUCs, 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. 17. Implementing Rules and Regulations. - Within ninety (90)

days from the effectivity of this Act, the BSP, in coordination with the DBM, COA, DOF, DICT, DILG, DTI, and other relevant agencies, shall promulgate the necessary rules and regulations for the effective implementation of this Act.

SEC. 18. Separability Clause. - Should any provision or part of this

Act be declared unconstitutional or invalid, the other provisions and parts hereof, insofar as they are separable from the invalid ones, shall remain in full force and effect.

SEC. 19. Repealing Clause. - All laws, decrees, orders,

proclamations, rules and regulations, or parts thereof, which are inconsistent with this Act are hereby repealed, amended, or modified accordingly.

SEC. 20. Effectivity. - This Act shall take effect fifteen (15) days

after its publication in the Official Gazette or in at least two (2) newspapers of general circulation. Approved,