Innovation

BSP rides the wave of technological

Technology-driven 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, 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. Balanced Approach to Innovation

The BangkoSentralngPilipinas (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 connect to banks and other financial system players with clear authority from regulators. The approach is also known as the “regulatory sandbox.” Harnessing Benefits, Managing Risks

Fintech innovations also support the BSP’s financial inclusion objectives. Leveraging on safe, innovative and costefficient digital solutions, financial institutions can significantly reduce transaction costs, provide faster banking services and expand market reach. Fintech innovations provide people from all walks of life (especially the unbanked and underserved populace) alternative access to much-needed financial services and investments.

Consistent with the BSP’s thrust to promote a truly-inclusive and efficient financial system, regulations allow BSP supervised financial institutions (BSFIs) 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 risk-based Know-Your-Customer (KYC) rules for certain lowrisk accounts. The use of technology as a substitute for faceto-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