TUESDAY, JULY 3, 2018 advertise@manilastandard.net
SPECIAL FEATURE
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RIDING THE WAVE OF TECHNOLOGICAL INNOVATION
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NAVIGATING THE FUTURE AT 25
ECHNOLOGYdriven innovations in financial services, or fintech, have become a prominent driving force in reshaping the financial system landscape here and abroad.
Fintech is fast transforming and disrupting traditional financial services delivery with the increased adoption of innovative digital solutions to maximize operational efficiency, enhance customer experience,
to leverage on innovative digital banking solutions to expand the scope of delivery of financial services to the financially unserved and underserved market. The BSP allows the use of third party cash agents as a cost-efficient service delivery channel and encourages banks to implement riskbased Know-Your-Customer (KYC) rules for certain low-risk accounts. The use of technology as a substitute for face-to-face contact requirements to facilitate customer on-boarding has become an allowable option for banks to benefit from innovative solutions. The BSP has enhanced its regulatory oversight for pawnshops and money service businesses (MSBs) allowing them to play a greater role in providing basic financial services to the unbanked. The use of innovative technologies also creates opportunities for both regulators
Chairman of the Monetary Board (MB) and Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. [center] welcomed newly-appointed MB Member V. Bruce Jularbal Tolentino to the BSP on 8 June 2018. With them in this photo are [from left] MB Members Antonio S. Abacan Jr., Felipe M. Medalla, Peter B. Favila, and Juan D. de Zuniga. Not in photo is Finance Secretary and Monetary Board member Carlos G. Dominguez III. Mr. Tolentino’s appointment completes the seven-member Monetary Board.
and gain competitive advantage. Fintech allows consumers (including those untapped by traditional financial intermediaries) to access financial services with utter speed, efficiency, affordability and convenience via multiple channels. In this changing and dynamic ecosystem, financial institutions, regulators and consumers must be vigilant and aware of fintech risks that may adversely affect the general safety and soundness of the banking system. The challenge is to capitalize on fintech while mitigating its associated risks.
and financial institutions to effectively pursue regulatory oversight and supervisory functions as well as to efficiently comply with regulatory requirements. Given the promising role of regulatory and supervisory technology, or RegTech, and the efficient data analytics, the BSP is currently exploring the possible adoption of RegTech solutions to strengthen its risk-based regulatory oversight and supervisory activities. The BSP has partnered with RegTech for Regulators Accelerator (R2A) to assess the feasibility of two (2) RegTech solutions which include an Application Programming Interface (API) system that will allow machine-to-machine reporting by banks to the BSP that further utilizes the more current and advanced Extensible Markup Language (XML) format in lieu of the existing reporting formats (Excel and CSV), thereby fully automating the end-to-end process of data capture and dissemination and an automated complaintshandling system or “chatbot” that will enable financial consumers to submit their concerns to the BSP via SMS, Viber and web portal for automatic processing. R2A is a pioneering project that provides technical assistance for financial sector regulators to develop and test the next generation of digital supervision tools and techniques. Cognizant of the clear benefits and opportunities offered by technological advancements, the BSP remains committed to further enhance and strengthen its supervisory framework to balance the benefits that fintech may bring with its potential risks. The BSP has taken a proactive stance in implementing various regulatory reforms and initiatives to strengthen its supervisory and technical capacity.
Balanced Approach towards Innovation The Bangko Sentral ng Pilipinas (BSP) recognizes the potential of innovative digital solutions in fostering greater efficiency in financial services delivery, and in further advancing financial inclusion. Thus, one of its strategic policy objectives is to support responsible fintech innovation. The BSP systematically adopts a regulatory environment that allows innovations to flourish while ensuring that risks are effectively managed and that consumer welfare is equally protected. The BSP recognizes that regulations should be agile to respond to fast changes in the fintech space. The BSP has a balanced regulatory approach to fintech anchored on three core principles, namely, risk-based and proportionate regulation, active multi-stakeholder collaboration, and consumer protection. These principles are implemented through the BSP’s flexible “test and learn” approach to financial innovations. In this approach, innovators can conIn 2017, the BSP issued the appropriate nect to banks and other financial system prudential guidelines on mitigating techplayers with clear authority from regulanology-related risks, including anti-money tors. The approach is also known as the laundering/combating the financing of ter“regulatory sandbox.” rorism (AML/CFT) concerns related with the use of fintech. These include the issuHarnessing Benefits ance of guidelines on virtual currency (VC) while Managing Risks Fintech innovations also support the exchanges which facilitate the conversion BSP’s financial inclusion objectives. or exchange of fiat currency to VC or vice Leveraging on safe, innovative and versa; social media risk management which cost-efficient digital solutions, finan- advocates responsible use by BSFIs of social cial institutions can significantly reduce media; and business continuity management transaction costs, provide faster banking which incorporates cyber-resilience in the services and expand market reach. Fin- BSFI’s business continuity planning process tech innovations provide people from all to adequately capture the potential impact walks of life (especially the unbanked of cyber events. Practical guidelines were and underserved populace) alternative also issued on the adoption of multi-factor access to much needed financial services authentication (MFA) measures for highrisk transactions and sensitive communicaand investments. Consistent with the BSP’s thrust to tions in response to rising cyber-attacks and promote a truly-inclusive and efficient threats involving fund transfers, payments financial system, regulations allow BSP and card-not-present (CNP) transactions. Parallel to this, the BSP is monitorsupervised financial institutions (BSFIs)
ing other fintech activities by emerging market players such as industry developments on crowd-funding and peer-topeer lending to determine if regulatory action is necessary.
Recently, the BSP established a unit dedicated to studying cybersecurity threat and tasked to enhance regulatory policy framework and to institutionalize cybersecurity due diligence within the financial industry. Similarly, the BSP has approved in May 2018 the creation of a regulatory subsector to serve as primary contact point of the BSP for fintech firms. Recognizing the cross-border nature of digital services, the BSP also strengthens multi-sectoral and regional collaborative engagements with relevant stakeholders to boost the financial system’s cyberposture and resilience. At present, the BSP is part of information sharing fora, in both domestic and international fronts, on various topics such as technology risk management, innovation, payment systems and cybersecurity. Moreover, the BSP closely coordinates with its foreign counterpart regulators for benchmarking and knowledge exchange with particular focus on fintech. In November 2017, the BSP and the Monetary Authority of Singapore (MAS) entered into a Fintech Cooperation Agreement which enables both regulators to refer capable fintech firms, share emerging fintech trends and developments, and facilitate work on fintech projects together. Indeed, both financial institutions and regulators must know how to keep pace and ride the waves of technological innovations to thrive and survive in this increasingly digital environment. On the part of the BSP, remains committed in monitoring fintech developments to ensure the stability of the banking system and to preserve the trust and confidence of the banking public. The appropriate gameplan is to design and implement clear and appropriate fintech policies and framework which are the important catalysts to innovation and opportunities inherent in fintech to successfully navigate the future.
The logo features a stylized maze depicting the BSP’s 25 years. It is a symbol of the BSP’s journey through the years, ready for a more technologydominated future.
On its 25th year, the Bangko Sentral ng Pilipinas (BSP) continues to be the country’s vanguard of price, financial and monetary stability. With increased vigilance, it is ready to navigate the digital frontier and the ever-changing economic and financial landscape. Under the leadership of its 4th Governor, Nestor A. Espenilla, Jr. and the auspices of his “Continuity Plus Plus” agenda, the BSP builds on strong frameworks, methods, and buffers already put in place, and on its consistent legacy of excellence in fulfilling its core mandates. Its current strategic direction also recognizes the need for bold and purposeful financial sector reforms, including the need to leverage on technology and digitalization to make the banking and financial system and payments and settlements system stronger, more dynamic, efficient and truly inclusive.