The Securities and Exchange Commission (SEC) has vowed to promote innovations in financial technology (fintech) while ensuring investors’ protection and market stability.
“It’s a delicate balancing act,” said Commissioner Kelvin Lester Lee, who handles the SEC’s newly created Philifintech Innovation Office (PIO). At the recent 15th Regional Leadership Program for Securities Regulators, he emphasized the role of regulators in managing the benefits and risks associated with fintech, explaining that the rise of new innovations could bring risks to financial stability, market integrity and investor interests.
“On the one hand, as regulators we don’t want to stifle innovation; in fact, we want to encourage growth. But on the other hand, we need to be aware of the risks, some of which are very uncertain at this point, that may arise by allowing new innovations to operate,” he said.
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“We don’t want to unduly expose investors and the public and the financial system to the risks that can be brought about by improperly vetted innovations,” he added.
Nonetheless, he noted how the COVID-19 pandemic had highlighted the role of fintech in making financial services accessible amid mobility restrictions.
“It is with this realization that we, at the SEC, understand that fintech and innovation now play a large role in the Philippine economy,” he added.
Lee noted the Philippines was primed for fintech innovation. He cited the 2021 Technology and Innovation Report of the United Nations Conference on Trade and Development, which ranked the Philippines 44th out of 158 counties in terms of readiness for frontier technologies and second for information and communications technology deployment, skills, research and development, industry activity and access to finance.
In regulating fintech in the Philippines, the SEC seeks to adhere to the principle that no one size fits all. Instead, it aims to: adopt an activity-based rather than an entity-based approach; implement principles-based regulations rather than specific rules; remain technology-neutral.
PIO, a new office under the SEC’s Corporate Governance and Finance Department, is mandated to reduce gaps in consumer and investor protection through a dedicated focus on the regulation and growth of fintech activities. The new unit also aims to create better-informed policies for new and existing fintech innovators and boost the SEC’s capacity to effectively regulate fintech activities and promote an innovative culture in the corporate sector.
“Our aim is that through our innovation office, we can regularly touch base with our stakeholders, and we get to learn from each other,” Lee said.