PAYMENT system digitalization is expected to lower demand for physical currencies and this will reduce cost for banknotes and coins production, according to the Bangko Sentral ng Pilipinas (BSP).

In a virtual briefing on Monday, BSP Governor Benjamin Diokno said the emergence of contactless payment technology has revolutionized the retail payment system.

"The use of banknotes and coins is expected to taper off over time, particularly the low denomination currencies," he said.

Diokno said the BSP, being the sole currency issuer in the country, ensures the timely and ample supply of good and quality paper bills and coins in the most cost-effective and efficient way.

He said the BSP has also teamed up with several counterparts overseas to compare notes such as on currency forecasting.

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Diokno said the central bank's policy-making Monetary Board on Jan. 8, 2020 approved the BSP's forecasting framework which utilizes econometric models that link a set of macroeconomic variables with currency management variables.

"The changing mix of currency denomination should be compatible with the real demand in response to changes in circumstances such as e-payment usage, price level and consumer preferences," he said.

Diokno said the BSP will soon release the results of a study regarding the impact of digitalization of payments system on domestic growth, citing that "digital payments have been a catalyst for accelerating financial inclusion and is spurring economic growth."