BSP: Innovation, safety mix crucial in fintech

SINGAPORE – Striking the right balance between creating an environment that allows innovation and ensuring the safety of the Philippine financial system is of paramount importance, according to the Bangko Sentral ng Pillipinas (BSP).

In an interview with CNBC on the sidelines of the 2022 Singapore Fintech Festival, BSP Deputy Governor Chuchi Fonacier said the regulator continues to collaborate with banks as well as non-banks or financial technology (fintech) providers to create the right balance between innovation and safety of the Philippine financial system.

“We really want to strike the balance between providing an enabling regulatory environment for innovation to flourish but at the same time, of course, really ensuring as well, the safety and soundness of the financial system,” Fonacier said.

Under its Digital Payments Transformation Roadmap, the BSP aims to convert 50 percent of total retail payments to electronic channels and increase the number of Filipino adults with formal accounts to 70 percent by 2023.

BSP director Melchor Plabasan, who heads the central bank’s Technology Risk and Innovation Supervision Department, said the share of digital payments to total retail transactions increased to 30.3 percent in 2021 from only 20.1 percent in 2020 as more Filipinos continued to embrace digitalization.

Likewise, Plabasan added that the number of banked Filipino adults almost doubled to 56 percent in 2021 from 29 percent in 2019.

Fonacier said banks continue to collaborate with fintech to provide innovative products and services in the Philippines.

“It’s understandable that at first they would like to think it to be as a threat to them. But right now, we’ve noted certain partnerships between fintech companies and the banks,” she said.

“It is actually a vibrant arrangement right now between banks and non-banks, let’s say the fintech players, as well as that of course of the banks,” Fonacier said.

She said the BSP and other regulators such as the Securities and Exchange Commission (SEC) continue to evaluate and assess the advantages and disadvantages of the central bank digital currency as well as cryptocurrencies such as stable coins.

“As far as the SEC is concerned, they’re actually in that stage right now where they would like to know more and understand the risks attendant to this type of virtual assets,” Fonacier said.

On the other hand, the BSP continues to regulate virtual asset service providers (VASPs).

“That’s the way the regulators should really be adaptive and as agile as far as innovation technology is concerned,” Fonacier said.