BSP: Philippine Banks Capitalizing on Fintech to Reach Greater Scale

Jun 2019

The central bank of the Philippines (Bangko Sentral ng Pilipinas or BSP) highlighted in its latest Banking Sector Outlook Survey (BSOS) report that majority of local banks are optimizing the use financial technology in the next two years as a strategy to enhance operations and improve customer service.     

The BSOS is a BSP-initiated report launched in 2018 that serves as a measure of proactive and forward-looking approach to surveillance and financial supervision as well as to analyze the banks’ business models moving forward. There were 120 respondents who are CEOs and country managers of universal and commercial banks, foreign banks, thrift banks, and rural/cooperative banks.

According to the survey, the lenders remain optimistic on the country’s overall economic growth despite global uncertainties. Likewise, 92.4% of the respondents projected a double-digit growth by the end of 2018. However, the survey also identified internal and external factors that affect the industry such as money laundering risk, hiring or retention of talents, and credit risk. To address these risks, the local sector will leverage on the use of fintech for strategic efficiency and protection with 53.8% of respondents from domestic U/KBs (universal and commercial banks) said 10% to 25% of their banking transactions will be digitalized in the next two years in response to local competition and the evolving needs of its clients as well as to enhance data protection and cybersecurity. Six out of 12 respondents from foreign U/KBs stated that more than 50% of their banking transactions will utilize digital means. Overall, the survey results for the first and second semester of 2018 reveal that more than 70% of banks have plans to use technology in the banking transactions.

The rising adoption of technology in the financial sector is in line with the BSP’s implementation of PESONet and Instapay under the National Retail Payment System (NRPS) framework. The participation and compliance of the BSP-supervised financial institutions (BSFIs) to the NRPS requirements have been encouraging. In 2019, the BSP issued the guidelines on streamlining of licensing requirements for BSFIs that intend to offer electronic payment and financial services (EPFS).

BSP also issued an enhancement of technology and cyber-risk reporting and notification requirement in 2018. This allows the BSP to have ready access to accurate, timely and actionable information regarding BSFIs’ technology risk profiles as well as the evolving cyberthreat Environment. In addition, the Financial Technology Sub-Sector (FTSS) under the Financial Supervision Sector was created in 2018 which focuses on fintech related matters. Two units comprise the FTSS, the Payment System Oversight Department and the Technology Risk and Innovation Supervision Department. The former is the BSP’s dedicated unit for the formal oversight of the national payment system (NPS), while the latter conducts IT supervision and examination of banks and non-bank financial institutions.

(Sources: Business Mirror; Bangko Sentral ng Pilipinas)


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