Cloud-banking technology has a great potential to support the recovery of the Philippine economy, according to a central banker and private sector experts.

At a virtual town-hall discussion organized by the Stratbase ADR Institute on Friday, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi Fonacier said the pandemic had emphasized the need for the banking industry to harness the power of technology.

In line with this, she added, the BSP has been laying the groundwork for an expanded digital finance ecosystem in the last decade. This includes using and recognizing cloud-based technologies as a tool for inclusivity and efficiency among financials.

In 2013, the BSP had the foresight to ensure that we cultivate an enabling environment for innovation, including the cloud-based technologies as we see [their] growing recognition and application, Fonacier said.

Through Circular 808, she said, the central bank provided a comprehensive information technology (IT) risk management framework, which guides entities in managing IT-related risks.

It also gave a particular force for cloud-based technologies to set the context for its definition, classification, vendor management and compliance-related items, such as governance, due diligence, security and data privacy, data ownership, and business-continuity arrangements.

Cloud-based core banking is a facility that is affordable, convenient and [offers] reliable computing services on demand. It also allows banks to gain access to critical infrastructure and computational resources that would otherwise be out of their financial reach, or are too complex to manage, the Bangko Sentral official said.

She added that cloud computing could also be an alternative channel for business continuity and disaster-recovery arrangements.

Recognizing that cloud computing is a key enabler of the new normal in banking, Fonacier announced that the BSP was revising its cloud-computing regulations to take into account, for example, that the Covid-19 crisis had reduced physical-banking touchpoints.

Nonetheless, she said the central bank, within its regulatory purview, would support the new economy setup and ensure that the face of digital transformation would proceed hand-in-hand with caution and adequate risk management.

There is no playbook on how we can reshape the economy in our continuing digital transformation, but we can be guided by our resolve that innovation and collaboration need to work hand in hand in the service of the unbanked and most vulnerable, Fonacier added.

A big plus

Also during the discussion, Bank of the Philippine Islands Chief Executive Officer and President Cezar Consing said the pandemic had demonstrated the importance of cloud computing.

The use of the cloud is a big plus. Above the line, it encourages innovation, more efficient ways of working and better integration. Below the line, think about operational resiliency, better IT security and frankly you only pay for what you use, he added.

Consing, also the president of the Bankers Association of the Philippines, said using the cloud would increase revenues and reduce lenders expenses.

Increased profitability will mean faster recovery for banks. In the Covid crisis, with the use of the cloud, my guess is it will take only three, maybe four years [to be profitable again], he added.

The estimated time was shorter than the six or seven years that banks spent to get their profits back after the 1997 Asian financial crisis.

Union Bank of the Philippines Vice Chairman Justo Ortiz said economic recovery would be ultimately anchored on enhancing the productivity and increasing the value created by the key players that drive economic growth in emerging markets like the Philippines.

As cloud-based services are now easily accessible to all firms, it can help micro, small and medium enterprises (MSMEs) to tech up without much capital and human resource, according to him.

Access to outsource micro services in platforms hosted in the cloud gives smaller companies [a] competitive advantage over vertically integrated and highly bureaucratic corporations because they are not burdened by large fixed costs from labor and tech and capital investments, Ortiz explained.

With cloud-based technology, he said small businesses would achieve world-class processes, higher productivity and scalability on demand, and greater market reach.

MSMEs become more competitive, and thus prosper, contributing in a meaningful way to the countrys overall economic growth, the UnionBank executive added.

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Cloud banking seen to aid economic recovery The Manila Times - The Manila Times