Increasing use of digital payments in the financial system had advanced the timetable of the Bangko Sentral ng Pilipinas (BSP) for the massive digitalization of the financial system that was initially projected to be achieved within three years.
Lyn Javier, managing director of the BSP Policy and Specialized Supervision Sub-Sector noted the three pillars that will serve as BSP’s guidance in achieving its digital payment objectives.
“It’s anchored on digital payment streams but other than that, we wanted to showcase our use cases wherein the public would be enticed to use digital platforms in processing their transactions,” Javier told Daily Tribune columnist Bing Matoto during the live virtual program Straight Talk on Tuesday.
“The digital infrastructure in which the Philippine ID system is also one of the identified priority projects is the second pillar and the third is digital payments on governance standards,” she added.
According to her, these pillars will serve as the BSP’s guide for digital payments transformation with a twin goal of achieving 50 percent of retail payments processed digitally and increasing the number of Filipinos with a financial account to 70 percent by 2023.
Still, the BSP executive said they wanted to ensure that as the market moves towards a digital economy, necessary standards will be in place to ensure the safety and security of information of both parties involved.
BSP director for Technology Risk and Innovation Supervision Department Mhel Plabasan disclosed that they are now in the final stages of the planned open finance framework.
The central bank defines open finance as the sharing and leveraging of customer-permissioned data among banks, other financial institutions and third-parties to build innovative financial solutions.
“Essentially, it’s a secure and safe means of sharing information so that it can empower consumers. A classic example would be when opening an account, you can just instruct Bank B to provide Bank A your financial information security so that you don’t have to redo the process,” Plabasan explained.
In terms of digital or virtual banks, the BSP official cited that the license for such has received a lot of interests not only from existing industry players but from new players and financial technology or fintech companies as well.
“There are a lot of interest also from existing fintech players (but) we cannot disclose yet. They haven’t formally applied yet but there are lots of interests in terms of business proposition,” Plabasan said.
According to him, applying for the digital bank license will provide an additional revenue source for fintechs especially e-money issuers as it will allow them to lend money.
The BSP earlier announced that it will impose a P1 billion minimum capital requirement for new digital banks as the banking regulator distinguished such as a new bank classification.
A digital bank will be subject to the prudential requirements on corporate governance and risk management, particularly on information technology and cybersecurity, outsourcing, consumer protection and anti-money laundering and terrorism financing, as provided under existing regulations, with due regard to the application of the principle of proportionality.
Still, the central bank requires such banks to have at least one physical branch to address consumer complaints and will serve as a touchpoint for regulators.