By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) has shifted to a higher gear in dealing with cybersecurity threats and risks to financial technology (FinTechs) while increasing the digitalization of banking services.
BSP Deputy Governor Chuchi G. Fonacier said that as the economy grows, the central bank and the banking industry are turning more to digital transformation in the financial services for “real-time, on-demand financial services” to expand customer-base, but she warned that the more technologically advanced the market becomes, the higher the risks and threats.
“As funds are channeled more efficiently, expediently and expansively, limitless opportunities that can drive business and industry growth and expand financial inclusion are within reach,” she told a forum last week.
“(But) before we get too optimistic, though, there are potential risks arising from FinTechs that we need to watch out for. Given that these are not yet fully tested or mainstreamed technologies, there may be unforeseen hazards that transform or accentuate traditional financial risks such as credit, liquidity, market, operational and settlement risks,” said Fonacier. “The added complexity can also mean greater vulnerabilities to cybersecurity threats and systemic risks.”
The growth of FinTechs has been significant. Based on FinTech Global data, from 2014 to mid-2018, investments have reached $41.7 billion.
Fonacier said the BSP is not curtailing the growth of the sector but they are mindful of “trade-offs.” “We continue to support the development of an enabling regulatory environment conducive to digitalization while managing associated risks.”
To date, the BSP has no FinTech-focused regulations. But, the BSP addresses potential risks by implementing risk-based, proportionate and “fair” regulations. They also have active multi-stakeholder collaboration and policies ensuring consumer protection.
There have been key policy changes, said Fonacier, such as new rules for money service business and regulation of virtual currency exchanges.
“As we are experiencing remarkable success in our digital transformation initiatives, the BSP remains steadfast in undertaking major organizational reforms and projects for a more proactive supervisory and regulatory stance,” she said.
The central bank is recognized as a pioneer in digital and technology-related policies. Its virtual currency policy and IT security rules are a first in the region. The most recent is its adoption of RegTech (regulatory technology) and SupTech (supervisory technology). RegTech and SupTech, as defined by the BSP, are “next generation of digital supervision tools and techniques to improve the speed, quality, and comprehensiveness of information supporting targeted and risk-based decision-making by regulators.”