Banking industry spurs discussions on AFIN industry sandbox

September 08, 2017

The ASEAN Bankers Association (ABA), The Association of Banks of Singapore (ABS), and the Bankers Association of the Philippines (BAP) recently convened technology experts, financial institutions and regulators to discuss the plan of International Finance Corporation (IFC), a member of the World Bank Group and Monetary Authority of Singapore (MAS) in establishing a cloud-based testing environment for financial technology (fintech) firms and financial institutions to address issues of connectivity, local compliance and cross border compatibility within the ASEAN region.

Representatives from Cambodia, HongKong, Laos, Malaysia, Myanmar, Singapore and the Philippines attended the full-day discussion to understand and assess how this regional initiative on technology and innovations will enable real-time collaboration and cross-border policy harmonization across ASEAN for better interoperability.

“ASEAN financial industry’s continued vitality and success are dependent on member-banks that collaborate and embrace change and innovation for the benefit of the ASEAN Economic Community,” said Paul Gwee, ABA secretary general.

The industry sandbox platform will play a vital role for the creation of a regional network that would enable financial institutions and fintech players to integrate, test and refine digital finance and inclusion solutions under the ASEAN Financial Innovation Network (AFIN) initiatives in a cost-efficient manner.

“These initiatives will enable banks to access a qualified pool of fintech firms providing various tools and services for banking connectivity and scalability which promotes efficiency and competitiveness. Everything is becoming digital and consumers are now expecting for real-time automated access to their banking services which is why financial institutions are constantly striving to improve and innovate to better serve the public,” said BAP president Nestor Tan.

The industry sandbox platform would also be an avenue for the Bangko Sentral ng Pilipinas (BSP) to observe and appreciate attended issues for proportionate and fair regulation brought by digitization’s swift disruption of the banking and financial advancement.

BSP governor Nestor Espenilla said that the BSP supports the endeavor of the IFC to establish a regional network through AFIN to address issues concerning financial institutions. AFIN can strategically be used to widen the net of financial inclusion in the country for a more globally competitive economy and financial system.

“Collaboration and cooperation are also needed to foster deeper understanding of risks, involving appreciation for financial inclusion goals, and to gauge market experimentation,” Espenilla added.

AFIN is expected to advance financial inclusion reaching out to the micro, small and medium enterprises (MSMEs) and the unbanked through innovation and digital solutions. Consumer protection and public interest in light of modernization in the financial industry will always be a priority of the BSP.

“Transparency, suitability, security, and confidentiality and other values in digital solutions must be designed and employed,” Espenilla said.

IFC said that AFIN would operate through a dedicated entity which will initially work with a small cohort of banks and fintech providers on a non-commercial basis for the first two years to develop a proof of concept. In the first two years, regulators can observe while the sandbox works toward use of common application programming interface (API) and practices that will help facilitate interoperability and scaling.

Fintech firms also covered different approaches and digital solutions such as open architecture and APIs, cloud technology, block chain data sources and an array of services that banks need to meet the growing expectations of the banking public in this competitive age while retaining the existing legacy systems of banks. Fintech experts such as Percipient Partners, Intel, APAC Fidor AG, Microsoft Asia Pacific and IBM Philippines spearheaded the roundtable discussions.

Fintech Marketplace Sandbox 2017 is hosted and organized by ABA, ABS, and BAP which aims to provide an experimental fintech industry sandbox to quickly integrate and test out fintech solutions in multiple markets; allow deeper discussions among regulators for harmonization of policies for different markets and enhance the industry sandbox to a production utility to connect fintech solutions to multiple markets in the long run.