Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said small and medium enterprises (SMEs) will benefit from open finance since it will improve and expand financial inclusion in the country.
"With the tailor-fit solutions that open finance brings, we will be able to onboard more SMEs into the formal financial system and provide them with access to digital financial services,” said Diokno in a recent event hosted by the Italian Chamber of Commerce in the Philippines.
The Open Finance Framework will promote small businesses’ financial inclusion by making customer-centric financial products or services accessible to SMEs.
The BSP approved the Open Finance Framework last June after releasing the draft rules in December 2020 for feedback from industry players.
Open finance is defined as the sharing and leveraging of customer-permissioned data among banks, other financial institutions and third-parties for financial solutions such as those that provide real-time payments, financial transparency options for account holders, marketing and cross-selling opportunities.
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.
Basically, the framework allows for consent-driven data portability, interoperability, and collaborative partnerships with the same standards of data security and privacy.
Customers, as owners of the transaction data, will have the power to grant access to financial data which will help shape customer-centric products. "This will empower them (SMEs) to be an integral part of the country’s economic recovery," saif Diokno.
Last month, the BSP created an open finance oversight committee (OFOC) transition group as the interim governing body to form policies and standards for all banks.
In a circular letter (Circular Letter No. CL-2021-090), signed by Diokno on Nov. 18, the transition group is tasked to “pilot implementations under the open finance regulatory sandbox”.
The transition group will exist for two years and not more, and will serve as interim body until the formal establishment of an OFOC. The members of the transition group will be reviewed from time to time.
The OFOC members will come from each banking sector, namely the big banks or the universal and commercial banks, thrift banks, rural/cooperative banks, digital banks, e-money issuers, operators of payment systems, and the fintechs.
The OFOC when formally created, is an industry-led self-governing body that will adopt, update and enforce the rules of conduct of an open finance system.