BSP in talks with ASEAN banks for fintech testing

By Melissa Luz T. Lopez,
Senior Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) is currently in talks with other Southeast Asian central banks to adopt regional standards in testing latest financial technology (fintech) products.

Central banks from within the Association of Southeast Asian Nations (ASEAN) are considering a “regional sandbox,” BSP Governor Nestor A. Espenilla, Jr. said, which would essentially serve as a “one size fits all” scheme in trying out digital financial products.

“What’s being discussed right now at the ASEAN level is creating a regional sandbox… where providers can come in and basically experiment, and we regulators can learn from it,” Mr. Espenilla told reporters last week.

“When they (fintech firms) come to our jurisdictions, they don’t have to replicate the experiment. It’s more cost-effective.”

A regulatory sandbox provides emerging fintech firms some room to experiment in offering new products and services under close monitoring by the BSP, before they are covered by banking regulations.

Mr. Espenilla said the Philippines and Singapore were among the central banks that attended initial discussions held in Bangkok, but clarified that these plans are “not yet” a done deal: “Right now, it’s in the phase of convincing other ASEAN countries to join.”

Multilateral agencies have likewise expressed support for this region-wide initiative, the BSP chief added although declined to name these institutions. A regional sandbox means that the results of a tryout of a new fintech product under the watch of one central bank can be accepted and agreed to by another regulator in the region.

Mr. Espenilla said the BSP has been making use of sandboxes to assess the viability of digital banking products. It essentially involves allowing a fintech firm to offer a product “under defined parameters” such as time and location before they are allowed to provide the service on a wider scale.

The planned regional sandbox comes at a time of increased collaboration among Southeast Asian member-states with the ASEAN Economic Community in full swing, complemented by regional banking integration.

Introduced in December 2014, the ASEAN Banking Integration Framework seeks to allow qualified banks to operate freely within the region, subject to the regulations set by the host economy. The industry synergy is expected to unlock more opportunities for cross-border finance and regulatory cooperation, while also spurring increased intra-regional trade.

In November, the BSP partnered with the Monetary Authority of Singapore for “greater collaboration” on fintech. The agreement allows the two regulators to refer “promising” fintech firms to each other and share trends and discoveries about the digital space.

A similar deal on information exchange has been signed by Mr. Espenilla for the BSP and the Bank of Thailand in December last year.

The BSP has adopted a National Retail Payment System framework which allows more fintech players to offer electronic platforms, with the goal of raising the share of digital payments to 20% of all transactions by 2020 coming from a mere 1% share in 2013.

Online banking solutions are expected to bring down costs and spur increased economic activity, which would also encourage more Filipinos to use formal financial channels.