The Bangko Sentral ng Pilipinas (BSP) is proposing the use of satellites to bring financial products and services to the unbanked and underserved areas, and these are locations that are beyond the reach of telecommunication companies.
BSP Governor Benjamin E. Diokno, who has a goal of bringing 50 percent of all financial transactions as digital by 2023 and to have 70 percent of adult Filipinos with formal accounts by the same year, has “reached out” to President Duterte for help in ensuring these goals are met by allowing satellite technology to bridge communication to unbanked and underserved areas around the country.
“BSP has recognized that (limited Internet reach) is a barrier right now (and we mean to address) connectivity challenges especially in low-lying areas and remote areas,” said BSP Deputy Governor Chuchi G. Fonacier in a forum, “Secure and Reliable Cloud Banking for Economic Recovery” by Stratbase ADR.
Fonacier said the BSP is also coordinating with the Department of Information and Communications Technology (DICT) on improving communication links to expand financial inclusion.
Fonacier said the BSP has brought the concern before the Office of the President. “It’s not just at the DICT level but (also in) making use of satellites for areas that are not yet reached by the telco towers,” she said.
She stressed that the BSP has been “exerting efforts” and this is “a live problem and we do recognize that.”
“Governor Diokno is reaching out to the executive branch to be able to have this addressed,” said Fonacier. There were previous attempts to bring up the issue to Malacanang but there were legal “actors” that needed to be resolved since creating an executive order (EO) may not be that simple.
But, an EO is still possible in aid of resolving the unbanked and underserved situation by tapping satellite technology to provide communication links, said Fonacier.
The BSP’s survey on financial inclusion showed that digital payments and financial inclusion go hand-in-hand since digital technology is its driving force. But all these things will depend on connectivity, and in fact seven out of 10 adult Filipinos have mobile phones, which is an opportunity for digital finance.
The BSP survey also showed that rural areas or regions outside Metro Manila – not surprisingly – and these are those belonging to the lower socio-economic groups are the ones that have no access to financial services, much less on digital finance.
On the whole, based on the same survey, 69 percent of adult Filipinos have mobile phones and 12 percent of mobile phone owners use it for transactions. About 53 percent of adult Filipinos have Internet access and only nine percent of Internet users do transactions.
As for account ownership, the BSP’s goal of having 70 percent of all adult Filipinos onboarded by 2023 is a toll order considering there’s only 29 percent as of end-2018.
The promise of cloud
Fonacier said the use of cloud computing are enabling rural banks in far off areas to provide digital services. Cloud computing makes it possible for data storage, network, software use, among other services.
There are 20 banks that have been utilizing cloud in their core operations, and 16 are rural banks. There are also two universal and commercial banks, and two thrift banks.
Fonacier said 11 banks are currently applying for cloud outsourcing, mostly thrift, rural and cooperative banks.
The BSP is amending its rules on cloud regulations which will include easing of restrictions on outsourcing of core banking systems.
“We are currently revising our cloud computing regulations as a result of our assessment, consultations, engagements, with financial institutions and scanning of evolving framework from other regulatory bodies with international standards,” said Fonacier.
Essentially, she said the proposed amendments aim to ease restrictions and make it easier to secure BSP cloud approval which is "a difficult process.”
“The forthcoming version will also incorporate updated supervisory assessment framework that’s safer, and the assessment of material or non-material impact of the activity which provides guidance on the approval to outsource. And, this is a way of espousing the importance of cloud-based implementations that was emerging but was already within our midst,” she added.
“In other words, we are recognizing cloud computing as a key enabler of the ‘new normal’ in banking. Moreover, we hope that these amendments will encourage BSFIs to consider cloud-based solutions in their undertaking while still adhering to the risk-based regulatory framework,” said Fonacier.