Philippines - a fertile ground for blockchain & crypto currency
There are several factors that spur the growth of fintechs in the Philippines spread of internet and smartphones, large unbanked population and trust in technology, for example:
The Philippines has a large and rapidly growing population of internet and smartphone users, which has in fact facilitated the growth of the fintech sector in the country. Besides, a majority of the Filipinos consider the advantages of technology as a provider of opportunities far outweigh issues relating to security threats and frauds. This compares with the fact that only 31% of the population had bank accounts and Filipinos in general prefer to approach private lenders rather than banks for their financial needs. This trusting attitude towards technology and the low penetration of banking services naturally provide a fillip for the fintech enterprises.
The Philippines has a major share of its population working overseas - an estimated 10.2 million - and as much as $ 31.1 billion came as cash inward remittances to the country, in addition to $3 billion in wire transfers in 2017. And among the resident citizens, more than half live in rural areas and without any form of banking services. It is in this scenario that services such as mobile payments and money transfers became the simple alternative solutions.
A RESPONSIVE CENTRAL BANK
The central bank of the country, the Bangko Sentral ng Pilipinas (BSP) has been very responsive to innovations and has been encouraging the development of automated remittance services, virtual currencies and other fintech services. While one has to acquire an additional license from BSP while registering a fintech company in the Philippines, the license allows the entrepreneur to operate as a financial institution, non-financial institution or a lending company.
One of the recent initiatives of BSP is the setting up of a blockchain and fintech unit to monitor the new emerging industry in the country. According to BSP Governor Nestor Espenilla Jr, the unit, called Financial Technology Sub-Sector (FTSS), will conduct effective oversight of fintech and other innovative alternatives. FTSS will have two divisions - a Payment System Oversight Department and Core Information Technology Specialist Group.
FOCUS ON BLOCKCHAIN
The Philippines is increasingly becoming a top center in the world for blockchain and cryptocurrency projects. The main support is from the regulators, who are open to adoption of these technologies and BSP and the Securities and Exchange Commission (SEC) are working towards regulating cryptocurrencies.
At a convention of bankers in Manila recently, Espenilla said regulatory policies and standards must evolve alongside emerging technologies and the digital transformation of the banking system. He said BSP espouses a flexible ‘test-andlearn’ approach to financial innovation and the central bank would set up a ‘regulatory sandbox’, to provide a testing ground for new business models to guide the regulators, in assessing potential risks. This approach encourages dialogue and multi-stakeholder collaboration among fintechs and various financial sector players. The purpose is to achieve a ‘whole-of-government approach’ to ensure policy consistency and prevent regulatory arbitrage.
With this support and the keen response from entrepreneurs, fintech companies are expected to have a 16.4% annual growth rate and by 2022, it is expected to reach a half-trillion peso mark.
Some of the instances of bank-fintech collaboration are:
The Bank of the Philippines Islands (BPI) will open up its facilities not only to fintechs for applications such as loan origination, mortgage finders, etc., but to eCommerce providers. The bank has developed in collaboration with a fintech company the iPoS with Interactive Client Assistance and Requirements eSubmission, or iCARE, which is an interactive iPad application to
help in after-sales servicing. BDO Unibank has partnered with Japan-based Seven Bank to make it easier for Filipinos in Japan to remit money using a mobile app. Seven Bank specializes in ATM services.
Unionbank of the Philippines is making use of blockchain to engage more customers to get their inputs on the ‘Ark’, which is the first digital bank branch in the country. Unionbank is collaborating with partners to make Ark a great banking experience both for clients and non-clients.
Philippine Savings Bank (PSBank) has developed cardless withdrawal facility with the help of a fintech, called PayMe, which has apart from cardless withdrawal capability, also allows customers to request and collect funds from other PSBank mobile app users real-time.
Rizal Commercial Banking Corp (RCBC) launched the first mobile ATM in the Philippines called Cash Express that enables its customers to do various regular banking transactions even through mini retail stores or sari-sari stores.
The Philippines is also extremely enthusiastic about cryptocurrency and there are number of fintechs that are purely engaged in developing technology to power this mode of payment. There is a plan to create a ‘Crypto Valley of Asia’ in the Cagayan Special Economic Zone, which is expected to serve as a hub for both cryptocurrency and fintech companies. The initiative is spearheaded by the Cagayan Special Economic Zone Authority in collaboration with Northern Star Gaming and Resorts and it is expected to have some 25 crypto and fintech companies located there.
While the fintech sector is still nascent in the country, some of the country’s leading banks have taken notice and have opted to become collaborators. welcome it as a collaborator instead of competitor. According to Mon Jocson, executive vice president and head for Enterprise Segment Group of the Bank of the Philippine Islands (BPI), disaggregation and the re-bundling of traditional bank processes are made possible by technology, and for example, KYC functions from loan origination allow a bank to partner with fintech to address a wider market. Fintechs have substantial scope in areas like developing APIs and mobile banking apps. Similarly, the country has a national retail payment system that opens a bank’s payment interfaces, which in turn is driving the growth of fintechs in the Philippines.
BPI plans to be an active participant in this ecosystem and open up its facilities to fintechs for applications such as loan origination and mortgage finders.
The BSP is pursuing a digital revolution in the banking system in the country. It is closely monitoring various platforms that operate in areas like cryptocurrencies, peerto-peer lending and crowdfunding and has issued general guidelines governing digital currency exchanges. At the same time, it has taken care not to intervene in the routine functioning of the financial services sector, especially fintech innovations. The country has one single challenge - poor digital as well as physical infrastructure. However, the government’s ‘Build, Build, Build’ program offers a glimmer of hope.
Cagayan Special Economic Zone is out to create a Crypto Valley of Asia in the Philippines