BSP chief: Fintechs should play bigger role in post-pandemic PH economy
The central bank wants local financial technology (fintech) firms to play a bigger role in the new economy that will emerge from the coronavirus pandemic to include lending money on a retail basis—functions previously the exclusive domain of traditional financial institutions before the COVID-19 crisis.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said so-called fintech companies should play a key role in restarting the Philippine economy which is expected to experience its largest contraction in output this year since 1985.
“Fintechs can be and can provide the needed solutions,” he said in a video address to Fintech Alliance PH on Wednesday (May 20) afternoon.
“For instance, fintechs can offer turnkey loan origination and underwriting platform for the government’s direct lending programs,” Diokno said.
He added that these firms — which, at present, concentrate on providing convenient electronic payment channels for retail users — could offer digital solutions for micro, small and medium enterprises wanting to pivot their business models toward e-commerce.
“Some fintechs can serve as digital payment channels while others can offer last-mile lending conduits, like cooperatives and microfinance institutions, a shared digital platform to better serve and reach more clients,” Diokno said, saying that he is open to other services that fintech firms may want to propose.
The central bank is aiming to have 50 percent of all retail transactions in the Philippines done digitally by 2023, up from around 20 percent at present. The regulator also wants at least 70 percent of all adult Filipinos to be using digital transaction accounts within this period.
Diokno noted that the country has entered the crisis with solid macroeconomic fundamentals that gave authorities “sufficient fiscal and monetary policy space” to respond aggressively.
These included a series of interest rate cuts this year totalling 125 basis points — the last one being immediately after the start of the quarantine period last March — and a 200-basis-point cut in banks’ reserve requirement ratios.
Despite this, Diokno said the efficacy of these ‘Act One’ measures need to be brought to fruition during ‘Act Two’ which will include the rebuilding of the economy — a period during which he hopes the fintech industry will play a bigger role.
“There is no arguing that the new economy is digital,” Diokno said.
“Our aspirations for a more inclusive and prosperous post- COVID world necessitate putting in place the critical pillars of a digital economy, including robust digital infrastructure, digital skills, e-government, digital ID, and an enabling legal and regulatory framework,” the central bank chief said.
“There is no playbook for how fintech can pump-prime the economy, but we can perhaps be guided by basic principles for success,” he said. “To me, that would be seeking strategic partnerships, innovating solutions for impact, and never losing sight of our mission.”