CB Deputy Governor sounds warning note to banking industry and calls for technology embrace

CB Deputy Governor sounds warning note to banking industry and calls for technology embrace

Published by: Daily FT

By Charumini de Silva

Sri Lanka’s financial sector needs to rise up and embrace technology to foster economic growth or risk having the system be disrupted by more dynamic sectors, warned a top banking official yesterday.

Central Bank Deputy Governor Dr. Nandalal Weerasinghe, delivering his keynote address as Chief Guest at BankTech Asia, Sri Lanka Series called on the industry to take its services and access to the next level.

“My fellow colleagues, the new reality for the banking landscape is disruption,” he said.



Emphasising that the financial services sector needed to disrupt itself before someone else does it for them, Dr. Weerasinghe called on the financial sector to rise up to the challenge by investing in technology.

Pointing out that banking and finance has always been the lifeblood of many economies, with Sri Lanka no exception, he insisted that it was vital that the industry modernise its technology to provide more efficient, safe and better services for the country to advance in economic development.

“We as an industry are faced with two options in the new modern economy. We can choose to adapt to shifting consumer demands for digital technology or we can remain complacent and be left behind in this fast-paced world,” he added.

Given the rise of mobile technology, Dr. Weerasinghe said the banking sector could not remain complacent as it could make these services available to its customers around the clock.

“The banking sector is undergoing rapid transformations. Increasingly around the globe, and to some extent Sri Lanka, we are witnessing challenges competing with the incumbents with faster and more agile technology. Gone are the days when customers were required to walk into a branch to conduct their banking activities. They now expect safe and secure banking at the tips of their fingers,” he stated.

He acknowledged that the Central Bank had continued to take measures to strengthen the payment and settlement infrastructure of the country and to develop an efficient and stable system, capable of catering to growing payment needs

“To drive this crucial function, we are working towards improving the national payment system to promote electronic payments that would eventually lead to a less cash dependent society,” he noted.

In this regard, Dr. Weerasinghe said several measures had been included in the Central Bank of Sri Lanka Road Map for 2017-21. A payment platform is being developed to effect Government payments, particularly payments to Sri Lanka Customs, through the Common Electronic Fund Transfer Switch (CEFTS) in real time.

In addition, a National Card Scheme (NCS) is being introduced as a cost-effective alternative to currently available international card schemes and a Common Point-Of-Sale Switch (CPS) is being developed to facilitate clearing and switching of transactions carried out using  payment cards issued under the National Card Scheme. A Common Mobile Switch (CMobs) will be implemented to facilitate interoperability between mobile wallets.

“We will monitor the progress of licensed banks and other financial institutions joining the CEFTS, CPS and CMobS and adopt policies with a view of increasing the efficiency of electronic retail payment systems and minimising risks associated with such payment systems,” he added.

Sri Lanka banks, tech firms urged to co-operate to push e-commerce

Published by: Economy Next

ECONOMYNEXT – Sri Lankan banks need to co-operate among themselves and with technology companies to encourage greater use of digital transactions, Channa De Silva, chief executive of LankaClear.

He said LankaClear, an electronic clearing house owned by banks which handles inter-bank funds transfers and provides links for a common automated teller machine network, was keen to encourage digital transactions and reduce use of cash.

“We’re also interested in identifying why things are not moving the way they ought to and working with you, including your customers, to make it happen,” DeSilva told BankTech Asia 2017 in Colombo, a forum organized by Malaysia based Knowledge Group.

“Because the addressable market size is there, the technology is there, banks, customers and their requirements are there and what are we doing about it? How do we get together as a community and grow this business?”

De Silva said greater use of technology and encouragement of digital transactions has the potential to increase business for banks.

“If you grow the pie bigger, everybody benefits,” he said. “Because the size of the pie is not growing at the pace we want.”
(COLOMBO, March 27, 2017)

How Financial Technology Companies (Fintech) can Complement Bank Services, Products

By Imee Charlee C. DelavinReporter Business World Philippines

FINANCIAL TECHNOLOGY (FinTech) firms are seen to complement the products and services offered by banks, providing growth areas for lenders to expand market reach and tap the unbanked sector.


FinTech companies were earlier seen to play an increasingly important role in the financial services industry — gaining substantial scale from accessing large unbanked sectors — with the emergence of tech-savvy classes providing the growth areas.

Malik Khan Kotadia, Global Banking Group senior vice president, said FinTechs will allow lenders to adapt to the changing financial environment at a much faster pace noting how banks have been adapting “but the change is very slow and very incremental.”“Things have changed around us … banking environment has been changing too. We see banks moving, but moving slow. With the growth in mobile penetration, FinTech becomes an enabler [for the banks] to help expand and attract other markets, tapping into other segments that banks would otherwise have difficulty [going after],” Mr. Kotadia said in a presentation at the BankTechAsia 2016 Manila series on retail banking technologies in Makati on Tuesday.

In the Philippines, he noted FinTech companies and banks could work hand in hand through partnerships and collaborations where “it makes sense.”Smartphone penetration in the country stood at 34% and is growing fast with a push towards mass market adoption of mobile internet.Studies conducted by the global public-private group Better Than Cash Alliance said that Filipinos make about 2.5 billion payment transactions per month worth $74 billion, but only 1% of these is transacted electronically and 99% of the transactions are paid either in cash or checks.

247_7756Mark B. Perez, retail banking head for Metropolitan Bank & Trust Co. (Metrobank) shared the same view, saying FinTechs are “allies rather than threats” to the banks.“I generally think there are a lot of opportunities for FinTechs and banks to work together. While there are spaces where the FinTech companies seem to be better than banks, at the very core of the banking systems are the banks, so banks have the capability to drive the use of [FinTech],” Mr. Perez said.“FinTech provides us with something to learn from. You have to look at it like partnerships — e-commerce is to retail stores and FinTech is to banks … eventually there will be stand alone banks, banks with FinTech components and FinTech firms alone. Its the natural progression of technology. That’s the way to go.”

Debt watcher Fitch Rating had said FinTech firms could potentially change the banking status quo and possibly disrupt the financial sector, with risks where banks and regulators have limited experience in managing new technologies.

Nonetheless, FinTech remains a “nascent sector” despite rapid growth in large markets with peer-to-peer (P2P) lending, online payment systems and digital wallets focused on retail consumers.

“The rise of FinTech could raise risks to traditional banks which fail to transform over the long term. The rapid adoption of disruptive tech could raise security and operational vulnerabilities for banks if systems and resources to manage the new technologies are not enhanced … New technologies could also alter banks’ business and operating models in the long term by eroding a previously lucrative business line or reliable funding source, and thus indirectly affect credit profiles as well,” it added.

WED_9491Lito M. Villanueva, Voyager vice president and head of Fintech, Digital Inclusion and Alliances, said during the same event that “FinTech is not about disrupting banks.”
“It is about enabling partners to promote cost and service efficiencies, engaging regulators on emerging digital landscape and empowering consumers via frictionless experience leveraging on the ubiquity of mobile,” Mr. Villanueva said.In particular, he noted that FinTech acts as enabler — in emerging markets like the Philippines — with banks still at the core of operations.“Banks, just like all big institutions, needs to adapt to and ride the digital tsunami, lest they become irrelevant. Digital partnerships will pave the way for reducing capex (capital expenditures) and achieving ever greater cost efficiencies,” he added.Mr. Villanueva noted that digitization can enhance the banking system’s return on assets by 0.3% to 0.4% which can translate into potential reduction of interest rates for borrowers by 1-1.5%.Smartphones, he noted, will start driving bank growth as it becomes the primary banking channel by 2017. In his presentation, the Voyager executive said 37% of cities and municipalities are without any banking presence; and it takes an average of 21 minutes to reach the nearest financial access point. The 16,316 automated teller machines (ATM) around the country also brings the ratio of ATM to people at 2:10,000 nationwide.
WED_9636For his part, Randolph Montessa, Land Bank of the Philippines first vice president and head of the card and e-banking group, said technology is the greatest enabler that will allow banks to service the unbanked sectors of the society and promote financial inclusion.“Banks should leverage on technology to enable full financial inclusion,” he said.

BSP Governor Amando M. Tetangco, Jr., earlier said shifting to an electronics-based payment system should help promote financial stability and inclusion in the country.

This article was also featured on print

How Philippines’ banking will look like in 2020

By Elyssa Christine Lopez |Entrepreneur Philippines | May 25, 2016


GOING DIGITAL.  BSP Core Information Technology Specialist Group Bank Officer V Anna Racines said the proposed NRPS framework would hopefully eradicate consumers’ initial hesitation to use digital banking. Photo by Elyssa Lopez / Entrepreneur Philippines

With the onslaught of Bitcoin and online shopping, banking and financial institutions are forced to keep up as the consumers’ habits rapidly change with the times.Bangko Sentral ng Pilipinas (BSP) is not turning a blind eye on these realities, in fact, they aspire that 20% of payments in the country will be done digitally by 2020.“A World Bank study actually showed that economies with great volume of electronic payments tend to have higher level of per capita income,” BSP Core Information Technology Specialist Group Bank Officer V Anna Racines said in her talk at the 8th BankTech Asia on Tuesday, May 24.

But the road to digital adaption will not be smooth ride, as a study of Better than Cash Alliance in 2015 revealed that out of all payment transactions done in the Philippines, only 1% are considered digital.


National Retail Payment System

So BSP proposed the National Retail Payment System (NRPS) framework to the industry that will, hopefully, convene financial institutions, banks, and other government agencies to embrace the digital solutions available and craft innovations for better services to the public. “The NRPS framework are high-level principles that would be followed by the financial institutions who wish to participate. This would hopefully enable interoperability between them with the assurance of safety and affordability for consumers,” Racines said.

Under the initiative, the electronic credit transfer scheme may be possible, which will enable any individual or business with an account in any financial institution to transfer funds and/or make payments to any other account within the framework. Once it pushes through, the retail payment system will hopefully clear consumers’ initial hesitation to keep their money in digital form for security purposes or impending inconvenience as its use is still limited.

BSP has been conducting studies since 2013 but only laid out the framework in December last year. Racines is positive the initiative will move forward even with the changing administration as President-elect Rodrigo Duterte also echoes what the central bank aspires for: a transparent and better banking service.

“I think President-elect Duterte will be supportive of this plan because he has previously stated he aims for transparency and what we’re doing are in accordance to his policies,” Racines told Entrepreneur.com.ph on the sidelines of the event. The passing into law of the formation of the Department of Information and Communications Technology is also good news for the central bank as this meant better government support of their initiatives.

Racines said they are still in talks with other government agencies like the Commission on Audit (COA) and Department of Finance (DOF) as they review on the present regulations and policies that could be impeding the NRPS to push through.“Although we already have the e-commerce law, there are still some policies that need to be reviewed. Like the COA mandates a physical receipt for some transactions,” Racines said.

TRAILBLAZING. FIN:TQ President and CEO Lito Villanueva said smartphones will be the leading banking chnnael by 2017 as more financial institutions adapt financial technologies. Photo by Elyssa Lopez / Entrepreneur Philippines

Emerging Filipino fintech

For the private sector, this has long been part of their plan even before the government took notice.In the first quarter report of PLDT Inc., the company highlighted their financial technologies’ triumphs, albeit small in scale today, and emphasized how the sector could be one of its revenue drivers in the future as part of their 3-year digitalization.

“Unlike what most believe, FinTech is an enabler not a disruptor for financial institutions. It will provide the gap for institutions to become competitive,” FIN:TQ President and CEO Lito Villanueva said in his talk at the 8th BankTech Asia. FinTech or financial technology is an economic industry composed of companies that use technology to make financial services more efficient.

Contrary to the public notion that FinTech is exclusive to millennials, Villanueva said a study showed 45% who use the technology are from Gen X. In fact, one of the emerging businesses in the sector is digital lending, which can still reach new markets especially in far flung, rural areas.

“In the Philippines, 21% of those who applied [for loans] came from third to sixth class municipalities or areas without brick and mortar banks. So banks, instead of building new branches, can actually just build better digital platforms to reach customers,” Villanueva added. The FIN:TQ executive said by 2017, smartphones will be the primary channel of banking, as most transactions would be done in a click.

“We have to make sure the solutions we will push to consumers are systemic, catalytic, transformational, and trailblazing for banks to stay relevant,” Villanueva said.

Source: http://www.entrepreneur.com.ph/startup-tips/ph-banking-fintech-2020-a746-20160525