The Bangko Sentral ng Pilipinas (BSP) will issue the guidelines for its open finance framework in the second quarter this year to allow customers to be the owner of their consolidated personal, financial and transaction data under an information-sharing setup, and to have better access to products and services that are more suitable to their needs.
“The BSP is now refining the draft circular on open finance based on comments we received from the industry, and we hope to finalize the circular within the second quarter of this year,” BSP Governor Benjamin E. Diokno said during Thursday’s “GBED Talks” online.
The BSP circulated the open finance draft circular last December 2020 and it included the proposal for the creation of an Open Finance Oversight Committee (OFOC) which is a BSP-recognized industry-led self-governing body.
Diokno said that in establishing an open finance ecosystem, the BSP has consulted with global subject matter experts, conducted a survey with BSP-supervised financial institutions and completed a comparative study of the regulatory landscape in other jurisdictions. “The underlying idea of open finance is that customers are the owner of transaction data, which could be shared if the customers wish to do so,” he explained.
Diokno said open finance is particularly beneficial in the digital finance marketplace and the in the world of open banking because it would break down “data silos” and open up access of data to more users.
“Open finance is seen to shape the industry,” he said. It will allow banks and other financial institutions to reach more clients and to offer more products and services. “Finding clients and turning them into customers can be far more efficient,” he said. This will be done more on the digital space which is no longer a matter of convience but of necessity, said Diokno.
As described by the BSP, open finance is 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.
Based on the BSP consultation with banks, the top picks of banks for open finance use revolve around customer identification, payment transactions, credit scoring and enhancing customer insights and even utilizing it for anti-money laundering monitoring and compliance.
Based on the draft circular on open finance, OFOC which the BSP 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 proposed framework has a tiered approach to its implementation by data sensitivity, data type, and data holder type. It also covered 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.
The open finance framework also recognizes the benefits of a “consent-driven data portability, interoperability and collaborative partnerships” of banks and third-party players.
Diokno has said many times that open finance and open banking is an important part of its digital transformation agenda. Both 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.