EPESO Y6 annual report.pdf

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USAID/E-PESO ACTIVITY

6th Annual Report October 1, 2019 – September 30, 2020

Submission Date: October 30, 2020

Prepared for the United States Agency for International Development by Chemonics International Inc.

under Contract No. AID-492-C-15-0001. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

CONTENTS

ACRONYMS ................................................................................................................................................. i

EXECUTIVE SUMMARY

PROGRAM OVERVIEW AND INTRODUCTION

PROJECT ACHIEVEMENTS

SUB-PURPOSE I: RAPID ADOPTION OF E-PAYMENTS IN FINANCIAL SYSTEMS

SUB-PURPOSE 2: INFRASTRUCTURE FOR E-PAYMENTS EXPANDED

SUB-PURPOSE 3: ENABLING ENVIRONMENT FOR E-PAYMENTS IMPROVED

SUB-PURPOSE 4: GAPS IN BROADER E-PAYMENT ECOSYSTEM ADDRESED

CROSS-CUTTING AND SUPPORTING ACTIVITIES

CHALLENGES AND LESSONS LEARNED

INTEGRATION OF CROSSCUTTING ISSUES and USAID FORWARD PRIORITIES

GENDER EQUALITY, FEMALE EMPOWERMENT, AND DISABILITY ACTION

POLICY AND GOVERNANCE SUPPORT

PUBLIC PRIVATE PARTNERSHIPS (PPP)

STAKEHOLDER PARTICIPATION AND INVOLVEMENT

USAID/E-PESO 6th Annual Report (October 1, 2019 – September 30, 2020) i

ACRONYMS

ACH Automated Clearing House

ATM Automated Teller Machine

BAP Banker’s Association of the Philippines

BIR Bureau of Internal Revenue

BRD Business Requirements Document

BSFI BSP Supervised Financial Institutions

BSP Central Bank of the Philippines

BTCA Better Than Cash Alliance

BTr Bureau of Treasury

CCT Conditional Cash Transfer

CDI Cities Development Initiative

DBM Department of Budget and Management

DBP Development Bank of the Philippines

DILG Department of Interior and Local Government

DevCon Developers Connect Philippines

DoF Department of Finance

DSWD Department of Social Welfare and Development

DTI Department of Trade and Industry eBIRForm Electronic BIR Tax Filing Form

EFT Electronic Fund Transfer eTPSCert Electronic Tax Software Provider Certification

ETRACS Enhanced Tax Revenue Assessment and Collection System

GPH Government of the Philippines

GRC Governance, Risk, and Compliance

KOICA Korea International Cooperation Agency

LGU Local Government Unit

MOU Memorandum of Understanding

MSME Micro, Small, and Medium Enterprise

MVP Minimum viable products

NATCCO National Confederation of Cooperatives

NRPS National Retail Payment System

OTOP One Town One Product

USAID/E-PESO 6th Annual Report (October 1, 2019 – September 30, 2020) ii

Pag-IBIG Home Development Mutual Fund

PCHC Philippine Clearing House Corporation

PEPPOL Pan-European Public Procurement Online

PFG Partnership for Growth

PPMI Philippine Payments Management, Inc.

PPP Public Private Partnership

QR Code Quick Response Code

RBAP Rural Bankers Association of the Philippines

RPT Real Property Taxes

SSS Social Security System

SuG Start-up group

TRISD Technology Risk and Innovation Supervision Department

TSP Tax Service Provider

TWG Technical working group

WE Women entrepreneurs

W-GDP Women’s Global Development and Prosperity Initiative Fund

USAID United States Agency for International Development

EXECUTIVE SUMMARY

The USAID/E-PESO program promotes broader economic growth and financial inclusion by helping to increase the use of digital payments in the Philippines. In December 2019, a Better Than Cash Alliance report stated that e-payments in the Philippines made up ten percent of all total payment transactions in 2018. This is an indicator of success for initiatives undertaken by E-PESO, which had aimed to increase e-payments from one percent in 2015, to ten percent of the total volume of domestic retail transactions by 2020.

For the year ending September 30, 2020, E-PESO continued to deliver target outputs and milestones despite the mobility and physical distancing restrictions that started in March 2020 which was brought about by the Covid-19 pandemic. In driving e-payments adoption by government, E-PESO completed the draft policy revision and financial literacy manual to support the Department of Social Welfare and Development (DSWD) in transitioning disbursements of social benefits under the Pantawid Pamilyang Pilipino (4Ps) conditional cash transfer program from cash cards to transaction accounts for greater financial inclusion. The manual is being field tested and will be completed in November 2020. In June 2020, the Activity completed the HACK^TAX innovation challenge by the Bureau of Internal Revenue (BIR) with the awarding of three (3) winning applications out of 170 entries led by an app that allows e-filing and e-payment of taxes using Facebook Messenger. E-PESO successfully launched the Connecting Women Entrepreneurs to the Digital Economy (CWEDE) project under the Women’s Global Development and Prosperity (W-GDP) Initiative in partnership with the Department of Trade and Industry (DTI), National Confederation of Cooperatives (NATCCO), Facebook, Lazada and Shopee. Integrated digital marketing training modules, based on training needs assessment conducted earlier, were developed and delivered to two out of six planned training batches to help about 500 women entrepreneurs become effective online sellers. Only one month into their 60-day training program, 68% of the trainees have put up their online stores and made 7,395 sales volume worth PHP

1.4 million. To promote digital payments adoption by businesses through e-filing and e-payment of taxes, E-PESO expanded the Electronic Tax Solution Provider (eTSP) system and added 14 tax return forms this year bringing the number of forms supported to 19 out of a total of 38 BIR forms.

On COVID-19 response work, E-PESO co-created the ReliefAgad (“quick relief”) app with the DSWD and an association of IT developers, and deployed it to help target beneficiaries register to DSWD’s Social Amelioration Program (SAP) emergency relief subsidies for about 13 million low-income households. A total of 4.3 million beneficiaries registered through ReliefAgad including 1.1 million who enrolled their bank or e-money accounts to receive their subsidies. E-PESO launched and completed various communications campaigns to increase awareness among the businesses and the public on the use of digital payments to continue making financial transactions despite the lockdowns imposed by GPH for public safety reasons. The campaigns were implemented in partnership with the Bangko Sentral ng Pilipinas (BSP), the DSWD and the BIR.

In expanding digital payments infrastructure, E-PESO worked with the BSP and the payments industry to launch an interoperable digital bills payment service that runs over PESONet rails with government institutions as the initial adopters. E-PESO also started working with the industry on the establishment of an interoperable cash agent network that will potentially utilize the InstaPay infrastructure. A draft term sheet is being completed to facilitate the signing of a multilateral agreement among the participating financial institutions to enable them to share cash agents and service customers’ cash deposit and withdrawal transactions especially in areas with few financial access points. An assessment of current cash agent regulations is also being completed to identify gaps and improve policy on shared cash agent networks.

In improving enabling environment for e-payments, a “Study on E-Payments Adoption by Businesses” was completed to identify barriers behind the low digital payments penetration among the business sector. The study identified the issues, root causes and recommendations on how businesses can expand digital payments usage. It is now being used to advance an e-invoicing and e-official receipt framework for the Philippines. E-PESO likewise assisted the BSP in the acquisition of a governance, risk and compliance (GRC) solution that will strengthen the payment industry’s cybersecurity through more effective compliance and reporting of the banks’ and electronic money issuers’ cybersecurity risk management activities. Meanwhile, digital payments usage continues to expand with PESONet growing over 8 times this September 2020 to 4.1 million transactions compared to last year, and Instapay more than 7 times at 28.2 million transactions.

On assisting USAID partner cities in adopting digital payments, E-PESO helped Valenzuela City integrate Paymaya mobile money service as an e-payment option for collecting local taxes and fees.

Two more local government units (LGUs), the Municipality of Ubay in Bohol Province and the Municipality of Nabunturan in Davao de Oro Province, have adopted digital payments with E-PESO intervention.

While many outputs and milestones were achieved during the year, several sub-tasks were unfavorably affected by the public health emergency brought about by the Covid-19 pandemic and thus removed from the latest workplan submitted to USAID in September 2020. Assistance to BTr, further work on establishing an interoperable cash agent network and improving the interoperable bills payment e-infrastructure could not be undertaken. Other sub-tasks where no progress could be achieved are the support to PPMI to expand its membership and onboarding process; support to BSP in formulating cybersecurity policy strategy, in implementing the Governance, Risk and Compliance (GRC) system, in developing cybersecurity capability of financial executives and in developing a cybersecurity awareness program with the payments industry.

Nonetheless, E-PESO is optimistic about completing its remaining tasks in the workplan. Through the crisis, policymakers, business sector, payments industry and the public have realized that massive digital adoption is needed to enable economic growth even under the constraints of social distancing and local area lockdowns. In fact, Secretary Dominguez of DOF conveyed such message in his speech at the #Hackatax awarding online ceremony. E-PESO will take advantage of this opportunity to further accelerate the digital payments adoption in the Philippines through its remaining workplan tasks.

PROGRAM OVERVIEW AND INTRODUCTION

Program Name: USAID/E-PESO Activity

Activity Start Date and End Date: March 18, 2015-February 17, 2021

Name of Prime Implementing Partner: Chemonics International Inc.

[Contract/Agreement] Number: AID-492-C-15-00001

Name of Subcontractors:

Leonine Initiatives Laggui and Associates Mode Devi Publishing, Inc.

CAI-STA Philippines Inc.

Moodlearning Inc.

SyCip Gorres Velayo & Company (Ernst & Young Philippines)

Major Counterpart Organizations

Central Bank of the Philippines (BSP) Department of Budget and Management Department of the Interior and Local Government Department of Social Welfare and Development Bureau of Internal Revenue Philippine Payments Management, Inc.

Geographic Coverage (cities and or countries)

Philippines

Reporting Period: April 1, 2020 - June 30, 2020

The E-PESO Activity (E-PESO) is a USAID/Philippines project that supports the U.S.-Philippines Partnership for Growth (PFG) in addressing constraints to sustained and more inclusive economic growth. E-PESO partners with the Government of the Philippines (GPH) and the private sector to achieve the rapid, widespread adoption of e-payments in a country where 99 percent of payment transactions still take place through cash.

E-payments offer a secure, cost-effective means for Filipinos to access a broader range of financial products and services that can help them build assets, better withstand shocks, and participate more broadly in the formal economy. E-payment services also help better track financial flows, in line with the GPH’s drive for greater transparency and accountability.

In 2014, the Economist Intelligence Unit recognized the Philippines as a top global leader in promoting financial inclusion. Worldwide trends show that countries instituting national financial inclusion strategies also tackle poverty at a higher rate than those that do not. The Central Bank of the Philippines (BSP) takes the lead in capitalizing on global trends with its National Strategy for Financial Inclusion, heavily focused on providing most Filipinos access to an electronic transaction account.

E-PESO helps Filipinos benefit from new and innovative e-payment products, more outlets that welcome the use of electronic money, improved transparency and accountability in transactions with government, and a stronger regulatory environment that protects consumers. It supports the development of a lasting, inclusive e-payment infrastructure that helps to explicitly meet the needs of Filipinos.

E-PESO focuses on four sub-purposes:

1: Work for the Rapid Adoption of e-Payments in Financial Systems. E-PESO supports the digitalization of large-scale payment streams in both the private and public sectors. It provides technical assistance for GPH agencies to improve services and fiscal management by expanding the use of e-payments in various transactions. E-PESO helps bring the benefits of digital payments to targeted businesses, including those from the fast-moving consumer goods industry with large retail payment flows.

2: Expand the Infrastructure for e-Payments. E-PESO supports the establishment of digital payment services that utilize the existing infrastructure under the BSP’s National Retail Payment System (NRPS) policy framework. These services include interoperable digital bills payment services, interoperable cash-in/cash-out agent networks, and merchant payments. E- PESO helps the industry set up these services and works with government and private institutional users to pilot and adopt the services.

3: Improve the Enabling Environment for e-Payments. E-PESO supports the BSP in establishing and implementing an interoperable NRPS. It provides the BSP technical assistance and training to promote digital security, consumer protection and confidence, financial inclusion, and e-payment stability within the broader payment system.

4: Address Gaps in the Broader e-Payment Ecosystem. E-PESO promotes global knowledge sharing of emerging trends to help identify and address supply and demand constraints to broader e-payment usage. It builds e-payment ecosystems with a particular focus on key cities identified under USAID’s Cities Development Initiative (CDI).

PROJECT ACHIEVEMENTS

SUB-PURPOSE I: RAPID ADOPTION OF

E-PAYMENTS IN FINANCIAL SYSTEMS

In its final fiscal year, E-PESO accelerated its work to push the adoption of digital payments at key aggregation points, to maximize the effect of interventions in achieving wholesale adoption of e-payments by businesses and government. While continuing with planned activities, E-PESO was able to integrate in the last two (2) quarters COVID-19-related activities to support both government and the private sector cope with the transition to the ‘new normal’ brough about by the pandemic.

Despite the COVID-19 pandemic, E-PESO was able to continue its work with the Department of Social Welfare and Development (DSWD) in transitioning from use of cash cards to transaction accounts and developing an enhanced financial literacy program to integrate financial inclusion in the Pantawid Pamilyang Pilipino Program (4Ps). The E-PESO-supported HACK^TAX innovation challenge of the Bureau of Internal Revenue (BIR) was successfully implemented with three (3) applications declared as winners out of 170 entries. E-PESO successfully launched the Connecting Women Entrepreneurs to the Digital Economy in partnership with the Department of Trade and Industry (DTI), National Cooperative Confederation (NATCCO), Lazada and Shopee. E-PESO continued supporting the BIR in expanding the Tax Solution Provider (TSP) tool to accommodate more tax return forms.

To support the government in its COVID-response initiatives, E-PESO assisted the DSWD in deploying digital solutions in the implementation of the Social Amelioration Program (SAP). To support both consumers and business cope with the challenges brought about by the pandemic by adopt digital payments to enable safe and remote transactions, E-PESO launched a digital payments communications campaign. The campaign was implemented in partnership with key stakeholders, namely, the Bangko Sentral ng Pilipinas (BSP), the DSWD and the BIR.

Task 1.1: Facilitate Adoption of e-Payment Services in Government Agencies

1.1.1 Support the Department of Budget and Management (DBM) in Rolling-Out the Budget and Treasury Management System (BTMS) (completed)

Activities for this Sub-task has already been completed.

1.1.2 Support a GPH Agency with Influence Over a Large Base – Home Development Mutual Fund (Pag-IBIG) and/or Social Security System (SSS)

This Sub-task was removed from the work plan as these GPH agencies have demonstrated their capacity to implement their e-payments adoption projects with their preferred banks. The Sub-task has also been taken over by other priorities.

1.1.3 Support a GPH Agency with Influence Over a Large Base – Department of Social Welfare and Development

E-PESO is providing technical assistance to the Department of Social Welfare and Development (DSWD) integrate financial inclusion in the Pantawid Pamilyang Pilipino Program (4Ps) by shifting the disbursement of cash grants from cash cards to transaction accounts, developing a comprehensive financial literacy program, and implementing a pilot using transaction accounts complemented by select training sessions of the first module of the financial literacy program. The project was kicked-off on November 22, 2019 with the signing of E-PESO’s technical assistance proposal. The signing was witnessed by representatives from the Bangko Sentral ng Pilipinas (BSP), Land Bank of the Philippines (Landbank) and the DSWD 4Ps National Program Management Office (NPMO).

Left (from left to right): DSWD Secretary Rolando Bautista and E-PESO Chief of Party Mamerto Tangonan signs E-PESO’s TA proposal.

The signing is witnessed by Managing Director Pia Tayag of the Center for Learning and Inclusion (CLIA) of the BSP and Vice-President Domingo Galsim of Landbank. Right (from left to right): Vicente Catudio (E-PESO), Director Joyce Sufficiencia (BSP), Managing Director Pia Tayag (BSP), Director Zaida Pulido (DSWD), Secretary Rolando Bautista (DSWD), Mamerto Tangonan (E-PESO), Director Gemma Gabuya (DSWD 4Ps NPMO), and Vice-President Domingo Galsim (Landbank).

A two-pronged strategy was adopted by the DSWD and the key stakeholders in the consultation workshop facilitated by E-PESO held on January 16 to 17, 2020 in Clarkfield, Pampanga, with the goal of graduating 4Ps beneficiary families achieving financial independence and sustainability, as they move up from poor to low-income or low middle-income socioeconomic class. The beneficiaries will be introduced to financial services that are relevant to them and progresses from the most basic transaction account to advanced products such as credit, insurance and investment. This will be supported by a 7-year comprehensive financial literacy program to provide beneficiaries with the skills needed to use the different financial services. A pilot in select areas on the use of transaction account supported by sessions under the first module will be implemented.

A key component of the E-PESO technical assistance is the enhancement of the current financial literacy module of the 4Ps for beneficiary families. The current financial literacy program of the 4Ps is essentially focused on budget and savings. Through E-PESO’s assistance, DSWD intends to expand the program to a more comprehensive and progressive training program aligning it to the 7-year tenure of beneficiaries as prescribed by the Republic Act No. 11310 or “An Act Institutionalizing the 4Ps”.

The workshop in Clarkfield Pampanga was attended by representatives from the 4Ps NPMO and regional offices as well as representatives from key stakeholder institutions, namely, the BSP, the Commission on Audit (COA), Landbank, the Microfinance Council of the Philippines (MCPI), and the Microinsurance Association of the Philippines (MIPAP). Select private sector representatives also participated like Hapinoy, Card Bank, and Cebuana Lhuillier. Hapinoy is a leading social enterprise which trains microentrepreneurs, particularly micro-retailing business (“sari-sari” store) in the countryside. Card Bank is the largest microfinance institution in the country catering mostly to microentrepreneurs in the countryside. Cebuana Lhuillier is the leading microinsurance provider in the country.

Left: Participants to the January 16-17, 2020 workshop in Clarkfield, Pampanga. Right: consultation meeting with the COA on October X, 2019 attended by (left to right) Vicente Catudio (E-PESO), Mamerto Tangonan (E-PESO), COA Chairman Michael Aguinaldo, Princess Shimadar Manaois-Battung (USAID/Philippines), Jackie Lou Dela Fuente (E-PESO), and Griselda Santos (E-PESO).

E-PESO conducted a series of online write shop sessions to develop the financial literacy training manual, from May 14 to May 22, 2020. The write shop was employed as a means to engage stakeholders to co-develop the financial literacy training manual. Five (5) 2-3-hour sessions were held featuring presentations by resource speakers and discussions with concerned stakeholders. Earlier, a baseline manual was developed by E-PESO made up of eleven (11) sessions across four (4) modules to serve as material for the write shop. The manual conformed to the DSWD-prescribed approach following the ADIDs model – Activity, Discussion, Input, Deepening and Synthesis, and was reviewed and approved by the DSWD prior to the write shop. The write stop sessions were participated 4Ps NPMO, the BSP, the DTI, the Securities and Exchange Commission (SEC), the National Privacy Commission (NPC), the MCPI, the MIPAP, Hapinoy, CARD Bank and Cebuana Lhuillier. The schedule of the write shops can be found in Annex 6.

Figure 1: Financial Inclusion Framework for 4Ps

A second draft of the financial literacy manual was submitted to DSWD on June 12, 2020. The revised manual incorporated the inputs and comments from the write shop. Also, from eleven (11) sessions, the manual was expanded to fifteen (15) sessions. A pre-testing was conducted in October 2020 to test Module 1 to select group of beneficiaries, determine the suitability of the module in terms of objectives, content, methodology and tools, elicit inputs and recommendations from the participants on areas for improvement, and revise module contents, tools and approaches, as necessary. Two groups participated in the pre-test, one from National Capital Region (NCR) and another one from Central Luzon (Region 3). The feedback from the pre-test were considered in revising or improving Module 1 and the rest of the manual. The manual is expected to be finalized in November 2020. The final draft will incorporate the three (3) sessions the BSP is developing under the Financial Consumer Protection Module as well as the pre-assessment questionnaires for each session which DSWD and E-PESO are currently developing.

On the other hand, to enable to transition from cash cards to transaction account as mode of payment for the 4Ps cash grants, E-PESO assisted the DSWD in drafting a policy adopting transaction accounts in the distribution of 4Ps cash grants as well as the request for legal opinion from COA on co-mingling of funds and retention of savings which are basic features of the transaction account. The COA legal opinion is expected to be obtained in November 2020 and will be the basis in finalizing the draft policy. The pilot rollout of the transaction account and financial literacy activities will commence in December 2020.

Figure 2: Financial Literacy Training Manual Outline

1.1.4 Support a GPH Agency with Influence Over a Large Base – Bureau of Treasury

As a consequence of the COVID-19 pandemic, this sub-task has been removed from the work plan due to the insufficient time remaining to complete it.

1.1.5 Support a GPH Agency with Influence Over a Large Base – Bureau of Internal Revenue

HACK^TAX Innovation Challenge

E-PESO is supporting the Bureau of Internal Revenue (BIR) improve and expand electronic platforms for tax filing and payments transactions as it transitions into a fully digitized tax administration system. The BIR, E-PESO, and Developers Connect Philippines (DEVCON), the largest software development community in the country, launched in October 2019 the HACK^TAX Innovation Challenge, a nationwide competition on developing online applications that would facilitate faster and more convenient digital taxpayer transactions with the BIR. The HACK^TAX competition aims to simplify and streamline tax payment by providing applications for use in filing and updating taxpayer registration details, and in paying monthly value-added tax, percentage tax, and annual income tax returns of self-employed taxpayers, including micro and small enterprises and professionals. It is part of the BIR’s digital transformation drive that seeks to improve the ease of doing business, and to make taxpayer services more convenient, reliable, and transparent.

Inclusion Fusion: Innovation x Impact Night event on November 22, 2019 to promote HACK^TAX to the software development community. Left: BIR Deputy Commissioner Lanee David delivering message. Right: panel discussion participants (left to right): Ross Fallorina (Senior Program Lead, QBO Philippines), Salve Duplito (co-host of ANC's "On the Money") Raymond Abrea (Founding Chairman, ACG) John Cary Ong (Executive VP and Head of Transaction Banking, UnionBank of the Philippines), Atty. Lanee Cui-David (Deputy Commissioner, BIR), Dr. John Paul Vergara (Ateneo de Manila University), Asec. Dakila Napao of Department of Finance, Jeffrey Lehrer (Chief Office of Economic Development & Governance, USAID Philippines), Richard Bon Maya (National Technology Officer, Microsoft Philippines)

A total of 175 proposals were received by the organizers in December 2019, an indication of the interest from the software development community to help the BIR improve and/or digitize its taxpayer services. From the 175 entries, 20 finalists were selected and announced in December 2019.

The finalists were selected by a panel of judges composed of BIR executives and the organizers. The HACK^TAX bootcamp, a series of learning sessions, kicked-off on January 18, 2020. Throughout the bootcamp period, the finalists were given the time to develop their prototype solutions, integrate and test their solutions with application programming interfaces (APIs) provided by partners, and refine their solutions.

HACK^TAX bootcamp sessions

Despite the ECQ from March to May 2020, which limited the mobility of the competing finalists, 12 teams pursued and completed the development of their solution. On June 19-20, 2020, HACK^TAX held an online demonstration and pitching featuring the remaining 12 finalists. The 12 finalists presented their solutions to the panel of judges composed of executives from the BIR, the Department of Finance (DOF), PayMaya Philippines, Inc., Union Bank of the Philippines, Talino Venture Labs, Microsoft Philippines, Amazon Web Services, Ateneo de Manila University, Asian Consulting Group, and Golden Arches Development Corp., who selected the winners. The challenge was finally concluded with a virtual awarding ceremony held last June 22, 2020.

Figure 3: HACK^TAX Finalists

Panel of Judges (from left to right, top to bottom): Javier Olives of PayMaya Philippines, Winston Damarillo of DevCon and Talino Venture Labs, Richard Moya of Microsoft Philippines, Nicole Ranna Feliciano of Union Bank of the Philippines, Robert Ramos of Golden Arches Development Corporation (McDonalds Philippines), Deputy Commissioner Celia King of BIR, Deputy Commissioner Marissa Cabreros of BIR, Assistant Commissioner Marietta Lorenzo of BIR, Dir. Mitch Abdon of DOF, John Paul Vergara of Ateneo de Manila University, Raymond Abrea of Asian Consulting Group, and Arvin de Torres of Amazon Web Services.

The virtual awarding ceremony was led by BIR Commissioner Caesar R. Dulay. He was joined by Department of Finance Secretary Carlos Dominguez III, USAID Mission Director Lawrence Hardy II, PayMaya Philippines founder & CEO Orlando Vea, and DEVCON founder Winston Damarillo.

Speakers during the HACK^TAX awarding ceremony (from left to right, top to bottom): Commissioner Caesar Dulay of the BIR, Sec.

Carlos Dominguez of the DOF, Mission Director Lawrence Hardy of USAID/Philippines, Deputy Commissioner Lanee David of BIR, Deputy Commissioner Arnel Guballa of BIR, Winston Damarillo of DevCon and Talino Venture Labs, and Orlando Vea of PayMaya Philippines.

The grand prize was won by BIR Mini-App Gorated team which developed ChatGenie, a solution for electronic filing and payment of taxes using Facebook Messenger, while eConnect and Third Channel won the first and second runner up prizes, respectively. The 3 winners and other online solutions developed through HACK^TAX Innovation Challenge are expected to contribute to the ease of doing business and increase tax collection efficiency in the country.

ChatGenie on Messenger makes tax payments easy, fast, seamless

With a solid background in software development and a crystal clear understanding of the pain points, the group that created ChatGenie, a tax payment solution using Facebook Messenger, hopes to encourage professionals and small businesses to pay their taxes diligently.

ChatGenie, the grand prize winner of HACK^TAX: The 1st BIR Tax Innovation Challenge, is a tax payment solution that utilizes available and accessible resources, which is Facebook Messenger. True to its promise of frictionless system, taxpayers just need to go to BIR Messenger, file and pay their taxes using various digital payment options. The solution will be interfaced with the BIR backend system and will be offered to taxpayers soon.

"If taxpayers want to be compliant in filing and paying their taxes, it should be a matter of just filing and paying it," said Ragde Falcis, co-founder at ChatGenie, a product of Gorated Innovation Labs Inc. (Gorated). "There is no need to download or register on a platform that is not BIR-related."

Falcis and his team at Gorated, a software development consulting company, first launched ChatGenie in 2018 as a chatbot platform. (A chatbot is a computer program that processes human conversation in digital platforms. Companies use chatbots to interact with customers without human intervention on their part.)

Falcis and his team streamlined the process of tax payments by eliminating downloads and third-party apps registration.

"We found out that all available digital solution requires taxpayers to download a mobile app and register on a third-party website," he explained. "Paying taxes is something that you do monthly, every quarter, or annually. The chance of forgetting the password every time you need to file taxes is high. True enough it showed on our survey that more than 50% forget their password every time they tried to log in."

As a mini-app within the Messenger app, ChatGenie incorporates various payment companies that include PayMaya and other credit card companies.

The HACK^TAX project demonstrates that it is possible for the private sector and the government to co-create lasting solutions to address development challenges in a country. Through the HACK^TAX, E-PESO was able to leverage private sector resources valued at US$120,000 and aggregate value of solutions developed by the 12 finalists at US$2.0 million.

To launch the solutions developed by the winners and the rest of the finalists, BIR needs to develop the application programming interfaces (APIs) and procure an API management tool. As agreed with BIR, E-PESO will continue to support the development of the initial and/or priority APIs in collaboration with the private sector. The applications are expected to be launched to the taxpaying public before the end of 2020.

Digital Tax Collection

E-PESO is continuously assisting the BIR implement digital payment channels to cater to taxpayers that are not mandated to use the Electronic Filing and Payment System (eFPS). These are mostly micro and small taxpayers which include sole proprietors, self-employed individuals and professionals which represent over 90% of the tax filers. With the assistance of E-PESO, the BIR has launched GCash in 2016, online card payment (credit card and ATM/debit card) through Development Bank of the Philippines’ (DBP) Pay Tax Online and Landbank’s LinkBiz Portal in 2017, PESONet via Landbank’s LinkBiz Portal and online payment via Union Bank of the Philippines in 2019, and PayMaya in early 2020. Transitioning tax payments to digital channels is part of the BIR’s digital transformation drive.

Since the introduction of eFPS and the integration of online banking services of both Authorized Government Depository Banks (AGDBs) and Authorized Agent Banks (AABs), the BIR has been collecting bulk of its tax revenues through digital payments. The eFPS facility is complemented by new digital payment channels servicing non-eFPS tax filers. By the end of 2019, total tax revenue collected from digital payment channels (eFPS and new channels) amount to Php1.831 trillion, up by 12% from 2018. The share of digital payments in tax revenue collection was sustained at 84% in 2019, although transaction volume share increased to 17%. The 2020Q3 (January to September 2020) tax revenue collection is showing an uptrend with digital payments increasing its share to 86% as well as a significant jump in digital payment transaction share to 29%. This is primarily caused by the COVID-19 pandemic which limited the mobility of taxpayers due to the ECQ.

Figure 4: Tax Collection by Payment Mode

Source: Bureau of Internal Revenue

The new digital tax payment channels introduced by BIR, with the support of E-EPSO, is beginning to make significant contribution to BIR’s tax collection efforts. For 2020 Q3, total tax revenue collection from these new channels amount to Php3.3 billion, which is already 171% higher than the full year 2019 collection of Php 1.22 billion. Payment transactions can potentially double the 450 thousand transactions in 2019 with 773 thousand already recorded in the first nine months of the year.

Figure 5: Tax Collection through New Digital Payment Channels

There is significant opportunity to grow digital payments and further increase the share of digital payments in total tax revenue collection of the BIR. With the ‘new normal’ being envisioned by the GPH and the business sector, digital payments will be the norm when making payments, including paying taxes. As of 2020 Q3, 78% of tax filers are already filing electronically, which is significantly up from 58% by the end of 2019. Also, the share of e-filing has jumped from 86% by the end of 2019 to 94% in the first nine months of 2020. We expect this trend to continue until the end of 2020.

Expanding the digital payment options further and making the taxpayer experience more convenient and seamless will push the transition of all e-filers to digital payment, thus drive transition of tax payment transactions higher than the peak 29% share noted as of 2020 Q3.

Figure 6: Tax Filing by Mode

Digital Tax Filing and Payment Campaign

USAID/E-PESO continued to support BIR’s Digital Tax Filing and Payment Campaign – an information drive aiming to promote and encourage taxpayers to shift to available electronic filing (e-filing) and electronic payment (e-payment) channels. USAID/E-PESO drafted social media cards featuring frequently asked questions (FAQs) from webinars conducted in June orienting corporations and individual taxpayers on online filing and payment options. Social media posts were created to promote BIR’s Electronic Audited Financial Statement (eAFS) website, which allows taxpayers to submit financial statements online and complements BIR’s other e-filing and e-payment platforms. Social media cards on online business registration were also developed. The posts outlined the registration process for individuals to either register their businesses through the use of electronic platforms, or update their registration using BIR Form 1905 to include additional business activity (online selling). The posts can be accessed here.

Eight social media posts were produced during the campaign duration. These posts recorded a combined total of 1.9 million impressions1 and gained 142,500 engagements2, yielding an average engagement rate3 of 8.32%, which is way above the 3% benchmark engagement rate.

While all posts had above-the-norm engagement rates, the content of the most engaged posts are instructional – how-to’s of e-payment and e-filing. Based on sample comments, it was noted that BIR’s audience pay attention to its content, hinted by relevant comments to the posts. To cite: when the posts are about using an e-payment platform of BIR most comments are about how to troubleshoot

1 Number of times post appeared on users’ feed/devices 2 Number of times users interacted with a post (like, comment, share) 3 Measure of how much impression converted to engagement https://www.facebook.com/birgovph/photos/pcb.1614542438710898/1614542082044267/ https://www.facebook.com/birgovph/photos/pcb.1616606028504539/1616591708505971 https://www.facebook.com/birgovph/photos/pcb.1622320797933062/1622319924599816/ not off tangent comments on other posts. To provide more relevant content to audiences, USAID/ E-PESO recommended combing through the comments section of posts for questions and concerns and producing social media cards answering those queries. Tutorials, troubleshooting tips on BIR processes and platforms like eFPS and e-Registration (eReg) will also keep the BIR page relevant to its audiences.

Parallel to the social media push, three tax guides are being finalized detailing steps and requirements for registration, filing, and payment for corporations/partnerships/non-individuals, individual taxpayers, and online sellers. The flyers will be completed in the next Quarter.

1.1.6 Support a GPH Agency with Influence Over a Large Base – Department of Trade and Industry (DTI)

Activities for this Sub-task has already been completed.

1.1.7: Support Social Amelioration Program of the Department of Social Welfare and Development

The Government of the Philippines (GPH) implemented the Social Amelioration Program (SAP), an emergency subsidy to 18 million low-income families that were affected by the Enhanced Community Quarantine (ECQ) measure to combat the COVID-19 epidemic, as prescribed by Republic Act No.

11469 also known as “Bayanihan to Heal as One Act”. Under the SAP, beneficiaries are entitled to receive a minimum of Php5,000 up to a maximum of Php8,000 a month, depending on the prevailing regional minimum wage rates as well as existing subsidy programs, for two (2) months to provide for basic food, medicine, and toiletries. The Department of Social Welfare and Development (DSWD) was mandated to lead the implementation of the SAP, in collaboration with other national government agencies (NGAs) to mitigate the effects of the ECQ to the most vulnerable sectors.

The initial distribution of the much needed subsidy was hampered by the lack of beneficiary data at the LGU level and the laborious process of collecting and encoding the beneficiary information and reporting the list to DSWD. Moreover, the manual cash distribution process further delayed the relief to low-income households. It required massive resources to secure and handle the cash, perform the documentation process, and enforce strictly physical distancing protocol. Moreover, cash presented additional risk of transmitting the coronavirus. Meanwhile, there was mounting pressure on the GPH to distribute the much-needed relief as Luzon as the lockdown expands to more areas in Visayas and Mindanao.

E-PESO assisted the DSWD in digitalizing the implementation of the SAP by supporting the development, deployment, and operationalization of the ReliefAgad system; deduplication of beneficiary data obtained from both ReliefAgad system and LGUs; providing advisory support in the implementation of digital payments for the second tranche cash grants; and providing strategic communications support leveraging digital communications technologies during the SAP implementation.

Figure 7: Scope of E-PESO Technical Assistance to DSWD

Digital Registration of SAP Beneficiaries through ReliefAgad

ReliefAgad was co-created / co-developed in partnership with Developers Connect Philippines (DEVCON), through its DEVCON Community of Technology Experts (DCTx), and the Department of Information and Communications Technology (DICT). ReliefAgad, a quick relief system, enabled the DSWD and LGUs to expedite the data capture of SAP beneficiary data through a self-registration web application which can work using smartphones. It leverages the wide adoption of smartphones in the Philippines estimated at 68M users. The app also provided a facility for beneficiaries to enroll their e-wallet or bank account for faster distribution of cash aid. The system also authenticates the beneficiary’s mobile number through a one-time password (OTP) to facilitate remote opening of e-wallet or digital bank account with financial institutions. DSWD provided the business user requirements, including the validation rules to ensure data accuracy and integrity. DEVCON provided technical expertise as well as the volunteer software developers to develop the system. DICT managed the infrastructure and conducted vulnerability assessment and penetration testing to ensure the system is cybersecure. E-PESO provided project management and conducted the quality assurance testing vis-à-vis system specification.

Figure 8: Screenshots of ReliefAgad App

The ReliefAgad system was developed in a very short period of time to quickly respond to DSWD.

Immediately after the initial meeting on April 3, 2020, the team released the first prototype of the web application on April 13, 2020 and was immediately tested in the City of Manila on the same day. A series of iteration / enhancements and field testing followed to rapidly improve the prototype.

ReliefAgad was soft launched on May 14, 2020 in the National Capital Region (NCR). A virtual press conference was held and was attended by officials from the DSWD, DICT and DILG and representatives from DEVCON and E-PESO. On June 4, 2020, ReliefAgad was launched nationwide through a virtual press conference which was attended by officials of the DSWD and BSP and representatives from DEVCON and E-PESO. Registration through the ReliefAgad app ended on June 25, 2020.

E-PESO participated in the test run of the ReliefAgad Web App in Orion and Balanga City, Bataan last May 8, 2020. DSWD Undersecretary Danilo Pamonag, Bataan 2nd District Congressman Joet Garcia and Mayor Antonio Raymundo of Orion, Bataan were present during the event. In top photo, DSWD Undersecretary Danilo Pamonag, Bataan 2nd District Congressman Joet Garcia and Mayor Antonio Raymundo of Orion, Bataan together with E-PESO and other local officials. Below left and right, beneficiaries registered to ReliefAgad during the test run of the web app in Bataan.

The virtual press conference and launch of DSWD ReliefAgad web application on May 14, 2020 was broadcast via Facebook live through the Facebook pages of Radio TV Malacañang (RTVM) and the Department of Social Welfare and Development (DSWD). Present to deliver remarks and address questions were DSWD Usec Danilo Pamonag, DICT Asec Emmanuel Caintig, and Developers Connect (DEVCON) Founder & CEO Mr. Winston Damarillo.

Also present were USAID/E-PESO Chief of Party Mr. Mamerto Tangonan and Digital Finance Advisor Mr. Vicente Catudio.

To deploy the ReliefAgad system, E- PESO supported the DSWD set-up a contact center to respond to beneficiary queries on how to use the web app. Through the contact center, beneficiaries can ask questions and ask for assistance related to the ReliefAgad web app via hotline numbers and FB Messenger. A ReliefAgad FB page was also set-up to provide important announcements and bulletins. Also, E-PESO developed instructional materials such as instruction video, flyer and radio plug which were deployed to

DSWD Field Offices (FOs). E-PESO also managed the ReliefAgad Facebook page, including development and posting of social media cards.

ReliefAgad Contact Center

ReliefAgad hotline numbers and Facebook Page

ReliefAgad flyer

By the end of June 2020, a total of 4.3 million SAP beneficiaries have registered through the ReliefAgad app. Beneficiaries who registered came primarily from Region IV-A (CALABARZON) with 1.4 million (33%) followed by the NCR with 1.1 million (28%) and Region 3 (Central Luzon) with

0.6 million (13%). Also, 1.2 million beneficiaries (27%), have enrolled a transaction account to receive their cash aid with 1.2 million (28%) electing to receive through remittance and 1.9 million (45%) preferring to receive cash. E-wallets like GCash and PayMaya were the preferred transaction accounts with 0.8 million (19%) accounts enrolled. On the other hand, 0.3 million (8%) enrolled bank accounts.

Figure 9: Cumulative Beneficiary Registration

Figure 10: Cumulative Registration by Region and Mode of Payment

The second tranche of the SAP covers 13.5M beneficiaries which includes 8.5M beneficiaries from the first tranche that are from areas under extended Enhanced Community Quarantine (ECQ), namely, National Capital Region (NCR), Central Luzon (Region 3) except Aurora, CALABARZON (Region 4- A), Benguet, Pangasinan, Albay, Cebu Province, Iloilo Province, Bacolod City, Davao City and Zamboanga City. Also included are the 5M left-out or waitlisted families that were not part of the first tranche.

Advisory Support on Digital Payments

E-PESO is also provided advisory support to DSWD to digitalize the disbursement of cash aids through or transaction accounts. Through the ReliefAgad system, E-PESO worked closely with the DSWD to add a facility that will allow beneficiaries to enroll their transaction account to facilitate digital payment of cash aid. On May 19, 2020, E-PESO submitted a position paper to DSWD on the different payment options for the distribution of the second tranche cash aid under the SAP. The position paper was presented in an inter-agency meeting organized by the DSWD and attended by representatives of DICT, BSP, Land Bank of the Philippines (Landbank), Commission on Audit (COA).

It was decided in the meeting that DSWD will use digital payments to disburse cash aid for the second tranche. The advisory support included assistance in drafting of FSP accreditation terms of reference, providing inputs to the multilateral agreement, drafting of implementing guidelines, and development of disbursement and liquidation business processes.

On June 30, 2020, the DSWD signed a multilateral agreement with seven (7) FSPs led by the Landbank for the digital disbursement of cash aid under the second tranche of the SAP. The other FSPs are G- Xchange, Inc./Mynt (GCash), PayMaya Philippines, Inc. (PayMaya), Rizal Commercial Banking Corporation (RCBC), Union Bank of the Philippines (UB), Robinsons Bank (RB) and StarPay. This was made possible with close collaboration between DSWD, the BSP and E-PESO.

During the ceremonial signing of the multilateral agreement on e-payment for SAP subsidies held last June 30.

Officials of DSWD and financial institutions show their signed agreement as witnesses including E-PESO representatives looked on during the ceremonial signing of the multilateral agreement on e-payment for SAP subsidies held last June 30.

Figure 11: SAP Second Tranche Cash Aid Distribution

Under the arrangement, Landbank will serve as fund manager to distribute aggregate funds to the participating FSPs and disburse directly to beneficiaries that have enrolled their e-money or bank account via the PESONet payment system. The other FSPs, namely, GCash, PayMaya, RCBC, UB, RB and StarPay were assigned to specific cities/municipalities based on presence of their cash-out partners. The FSPs will disburse digitally to the beneficiaries within their respective areas of assignment. A staging account (or limited-purpose transaction account) will be created for each beneficiary based on the initial know-your-customer (KYC) data provided by the DSWD. FSPs will validate the KYC data and perform additional KYC, if needed, to regularize the account. Cash aid will be credited directly to these newly created accounts. The FSPs will notify the beneficiaries how and where to withdraw or cash-out their cash aid. The DSWD FOs, with the assistance of the Philippine National Police (PNP) and/or Armed Forces of the Philippines (AFP), will disburse manually in areas with no FSP cash-out partner presence such is geographically isolated and depressed areas (GIDAs).

By the end of September 2020, 12.9 million beneficiaries have received their second tranche cash relief with aggregate value of US$1.7 billion. This includes 4Ps beneficiaries that were qualified under SAP second tranche, beneficiaries who registered through LGUs as well as those who registered directly through ReliefAgad. Also, 92% of beneficiaries were paid digitally using their transaction account, as opposed to pre-dominantly ‘cash’ during the first tranche.

Through the institutional arrangement with FSPs, 9.3 million new transaction accounts of individuals in the low- income segment were created, effectively contributing to increasing financial inclusion in the country. Through the more stringent KYC verification by FSPs, DSWD was able to clean its data of 10.4 million poor households with existing as well as new transaction accounts enabling DSWD to quickly distribute cash subsidies in future emergency or social subsidy programs.

Support on Strategic Communications for SAP

USAID/E-PESO wrapped up the technical assistance (TA) for the SAP Communications Campaign initiated last Quarter. The campaign aimed to help DSWD effectively communicate the mechanics of the Social Amelioration Program (SAP); convey DSWD as an institution that provides social amelioration and empathizes with…