The Bangko Sentral ng Pilipinas (BSP) is proposing the creation of an Open Finance Oversight Committee (OFOC), an industry-led self-governing body, as part of the country’s open finance framework.
Based on the draft circular on open finance, the BSP said the OFOC which it will oversee, will set its own standards and procedures and promote “non-discriminatory membership by ensuring that key areas of interest of the financial industry are adequately represented and that all members and applicants for membership are treated fairly and consistently.” The committee will also adopt, update, and enforce its own procedural rules and rules of conduct.
The BSP has began to circulate the proposed circular to banks and has set the deadline for comments and consultations by December 23.
The BSP defines open finance as the sharing and leveraging of customer-permissioned data among banks, other financial institutions and third-parties to build innovative financial solutions, such as those that provide real-time payments, greater financial transparency options for account holders, marketing and cross-selling opportunities.
The proposed framework has a tiered approach to its implementation by data sensitivity, data type, and data holder type.
“The BSP sees the value of placing the governance of the industry into a single body with explicit formalized self-governance structure where the industry standards and inter-participant business rules are housed,” said BSP Governor Benjamin E. Diokno in the draft circular’s explanatory note. He said the OFOC will perform sound governance for open finance.
“In seeking to establish an open finance ecosystem, the BSP hopes to involve industry players and engage them in an active dialogue to facilitate mutual learning and optimal determination of an industry-led self-governing body/authority, which is expected to promulgate membership and participation rules and formulate standards and procedures for the industry,” said Diokno.
The proposed circular will cover technology, products and policies that will enable customers to “securely compare” financial services from qualified third-party service providers that are either account information service providers and/or payment initiation service providers.
According to the BSP policy statement on open finance framework, it recognizes the benefits of a “consent-driven data portability, interoperability and collaborative partnerships” of banks and third-party players.“The underlying idea of open finance is that customers are the owner of personal and transaction data, thus, such information shall be shared if the customers wish to do so. Towards this end, the BSP recognizes the potential complexities of business models and arrangements that will surface from the implementation of the open finance framework,” said Diokno.
In the draft circular, Diokno also said open banking has enabled banks to produce new products and services that are “beyond bank accounts” and “revolutionizing the way consumers and businesses use financial services.”The proposed circular was completed after the BSP’s survey on banks in June this year, which supported its comparative study of other countries’ open finance regulation.
Diokno said that local banks were “generally supportive of the idea signaling the need for BSP to draft the circular with due consideration to feedbacks and learnings gathered.”
Diokno has said many times that open finance and open banking is an important part of its digital transformation agenda.
“Open banking is not without risks, given the potential for malicious third-party applications to steal customer information and other data protection violations,” he said previously. Keeping customer information private is important as the BSP “lays the regulatory groundwork to protect the customer’s confidentiality and the financial institutions’ core systems,” he stressed.
Open finance and open banking is included in the BSP’s three-year digital payments transformation roadmap. Also called open bank data, it provides information to third-party financial service providers through application programming interfaces or APIs.
The Monetary Board has recently approved the digital bank circular. There are 10 banks that are currently in the process of applying for digital bank license with the BSP.