Financial Technology,Risk and Regulation,technology,

Financial Technology,Risk and Regulation,technology,

The central bank is comfortable – for now – on how they monitor and assess the growth of Fintech or financial technology companies in the Philippines and are confident that they have rules appropriate for a variety of financial-related operations.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said they have to be in the loop on how the sector will develop particularly as a support system to the financial sector. At the moment, he thinks they have adequate regulation for Fintechs.

“(BSP) needs to stay plugged in and understand what’s going. That’s why we’re also in constant dialogue with the industry and they have been very open with us, they come to us before they do anything (and) they ask us. That increases the level of trust and confidence in the system,” Espenilla said.

There are various Fintech operations and almost all are being watched by the central bank such as those that support the banking system. The BSP is aware of Fintechs that are service providers and offer services on their own but they are more interested in Fintechs that are acting as a connector between traditional banks and their customers. “The way we regulate Fintech depends on what they are doing so if they are doing bank-like services and taking money from the public then we will put them under a stronger regulatory environment,” Espenilla said. “If they are moving value – such as remittance – we also put them in an environment that is compatible with money laundering regulations. But if they are just basically providing a platform for a financial institution and making the financial institution efficient but they are not themselves providing services then there’s no need to regulate.”

Espenilla said they could catch banking-related Fintech operations under the BSP’s risk-based proportionate regulatory approach.

Fintech uses several modes to operate such as mobile wallet applications, digital KYC (know-your-customer), loan origination system, credit scoring, digital payment and remittance platform, and peer-to-peer transfer platforms. Espenilla said the BSP supports responsible Fintech innovation to have more efficient financial transactions but he also cautioned against risks that should be effectively managed.

He emphasized on risk-based management, multisectoral collaboration and consumer protection. While comfortable with existing regulation on Fintech, Espenilla said these rules have risks in mind and their approach is a balancing act of providing a level-playing field that will not hinder the sector’s further development and growth.

“BSP is proactive and will continue surveillance of Fintech and its regulations,” he said. “Our observation is that most banks are adapting innovation or partnering with Fintech to cope with competition, for customized services in real time …”

Espenilla said they also monitor non-banks in Fintech such as service providers which has been increasing lately. “We see non-banks and Fintech as value added… these layers need to be understood by regulators.”

Central banks often view Fintech with caution since it is a software-based business and vulnerable to all kinds of threats on data security.

Re-disseminated by The Asian Banker from Manila Bulletin