Union Bank of the Philippines (UnionBank) recently hosted a digital fireside chat on “Transformational Regulatory Change to Accelerate Innovation” with the Philippine Central Bank Governor Dr.Benjamin Diokno and Monetary Authority of Singapore (MAS) Chief FinTech Officer Sopnendu Mohanty, moderated by UnionBank Vice-Chairman Dr.Justo A. Ortiz.

The special hour-long discussion touched on various topics including open banking, the National ID system, blockchain and central bank digital currency among others. Governor Diokno and Mr.Mohanty also discussed the regulatory frameworks in the Philippines and Singapore respectively, highlighting the need for a sandbox approach when dealing with emerging technologies.

“Regulation and innovation – they sound like an oxymoron. For a long time it may have been the case but it is no longer,” said UnionBank Vice Chairman Justo Ortiz.

Ortiz opened the session by recalling how compliance with regulatory requirements paved the path for UnionBank’s transformation journey, showing how regulators can often be catalysts for innovation. “The only way to handle the compliance requirements in a sustainable, effective and timely way was to digitize our processes so that we could acquire, store, access and report the data in the various cuts the regulators want to see, and that went into our strategic planning exercise,” Ortiz shared.

Central Bank Governor Benjamin Diokno recognized the crucial role of technology in revitalizing the economy amidst the ongoing COVID-19 crisis. He emphasized that the Central Bank’s prioritizes support for banks and financial institutions so that these can deliver financial services to the public using innovative technology.

With this, the Governor shared three principles to foster an environment conducive to innovation. First, regulations have to risk-based, proportionate and fair. Second, there has to be active multi-stakeholder collaboration. Lastly, innovations should benefit consumers, especially the most vulnerable and those availing of financial services for the first time.

Governor Diokno shared an overview of the Philippine Central Bank’s Fintech Roadmap which focuses on proportionality of regulation based on risk profile and systemic importance. He also discussed improving Central Bank’s capabilities through regulatory and supervisory technology such as AI and predictive analytics. Finally, Governor Diokno highlighted the importance of open collaboration between financial regulators and fintech players and providing a flexible “test and learn” environment to engage and oversee fintech innovators. UnionBank’s i2i, which connects rural banks through a blockchain-based network, was cited as one of the successful initiatives born out of the Central Bank’s test and learn approach.

MAS Fintech Chief Sopnendu Mohanty shared his view on what a post-COVID19 economy will be like and gave insights on what regulators should look into to respond and adapt to this new normal.

He mentioned that the pandemic has affected businesses in two ways: first, it shifted the focus of digitalization from efficiency and productivity to resiliency and sustainability, and second, it accelerated the digitalization of all processes. According to Mohanty, this new digital normal will make economies more open, connected and interoperable. However, regulators must embrace progressive policies for this to happen.

Mohanty emphasized the need for National Digital Infrastructure which lays the foundation for fintech capabilities such as the National ID, eKYC and seamless payment facilities. He also noted the need for trusted data exchange at the national level.

Another key component of a connected financial services ecosystem is open Application Programming Interfaces (APIs) which can be accessed and consumed by financial institutions and fintechs. According to Mohanty, this is the first step to open banking and allows more seamless data accessibility among institutions, thus leading to better financial products and services as well as inclusive prosperity.

Lastly, Mohanty echoed the principles raised by Governor Diokno such as the need for a collaborative mindset and implementation of balanced and agile regulations. He also noted that an environment conducive to experimentation and collaboration, matched with regulation that adapts to ever-changing scenarios, can bring forth transformative innovations that benefit economies.

The fireside chat was part of UnionBank’s Tech Up 0-1-2-3 webinar series, co-organized with the Fintech Philippines Association, the Distributed Ledger Technology of the Philippines (DLTAP), Tech Up Pilipinas, Philippine Fintech Festival, UnionBank GlobalLinker and UBX.