Blockchain in banking, finance cued for surge
The use of blockchain technology in banking and finance will see a global market valued at about $95 billion by 2030, surging by 63 percent yearly within this decade thanks to opportunities arising from the COVID-19 pandemic, according to Research and Markets.
The market’s growth is “driven by the increasing need for faster and cheaper cross-border payment systems, higher compatibility with the financial services industry ecosystem, and growing demand for complete security mechanisms,” the research firm said.
In the Philippines, financial sector regulators led by the Bangko Sentral ng Pilipinas (BSP) are pushing for the upskilling of bank supervisors with emergent technologies to nurture a next-generation pool of talent needed for the digitalization of the industry.
These technologies include machine learning which helps in the automation of business processes as well as blockchain, the technology behind cryptocurrency, but especially supervisory and regulatory technologies.
Blockchain, initially used as a method of accounting for virtual currency Bitcoin, is now being used in different commercial activities.
Streamlined services
According to ConsenSys Software Inc., blockchain can streamline banking and lending services as the technology reduces counterparty risk and decreases issuance and settlement times.
The New York-based blockchain software firm explains that blockchain allows authenticated documentation and know-your-customer data, helping reduce operational risks and enabling real-time verification of financial documents.
“The FSF (Financial Sector Forum) is committed to developing the next generation of bank supervisors equipped with knowledge and competence on SupTech/RegTech issues,” BSP Governor Benjamin Diokno said earlier this month, referring to supervisory technology and regulatory technology.
Diokno also chairs the FSF which, along with the BSP, comprises the Philippine Deposit Insurance Corp., Securities and Exchange Commission and Insurance Commission.
Harnessing new technologies
For this purpose, one of the first activities that the FSF had organized and conducted was a webinar that discussed how “exponential technologies” may be harnessed for the financial sector.
Diokno said the FSF, through its Information Exchange Committee, will offer additional training programs throughout the year to facilitate in-depth understanding of technologies by financial sector supervisors.
“We leverage innovative financial technologies to effectively and efficiently fulfill our mandates and promote a sustainable, inclusive and resilient financial system,” he added.
Also, the adoption of digital technologies is expected to ramp up the role of microfinance institutions (MFIs) in bridging the financial inclusion gap in the Philippines as MFIs outpace large banks in providing services to Filipinos who have limited or no access to financial services.
Results from the 2019 Financial Inclusion Survey of the BSP show that MFIs reach 84 percent of towns and cities across the archipelago.
In comparison, banks—from large universal and commercial ones to smaller thrift and rural banks—have presence in just two-thirds or 69 percent of towns and cities.
