BSP to pilot open finance in Q2

Published January 27, 2022, 4:43 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) will pilot-test its open finance framework for three use cases — account opening, direct debit payments and fund transfers — in the second quarter this year.

BSP Governor Benjamin E. Diokno said Thursday, Jan. 27, that based on the BSP’s open finance timeline, the recently established Open Finance Oversight Committee (OFOC) and its transition group (TG) are currently conducting preparatory activities in the first three months of this year.

BSP Governor Benjamin E. Diokno

Within the first quarter, the OFOC will also identify and determine areas of cooperation to enable open finance which is a model based on collaboration and data sharing through Application Programming Interfaces (API), to promote digital transformation and financial inclusion.

“Prior to the pilot activities, the OFOC TG will work out the minimum participation guidelines,” said Diokno.

He said BSP-supervised financial institutions (BSFIs) can participate in the pilot activities and partner with any service provider. The open finance use cases include account opening, statement sharing or account aggregation, and direct debit payments or fund transfers.

By the second quarter this year, BSFIs will “have the opportunity to test the API services and get the best possible API implementation for their respective institutions.”

“This approach encourages market innovation while ensuring that appropriate prudential standards are observed by market players; hence, it avoids potentially good innovations to be constrained by excessive regulations or lack thereof. More importantly, key considerations on cybersecurity, consumer protection, and anti-money laundering will be ensured,” said Diokno.

The Open Finance Roadmap 2021 to 2024 outlines priority actions and the adoption of the policy framework as well as the capacity-building for regulation and cooperative oversight.

“It lays the groundwork for the establishment of an Open Finance ecosystem in the Philippines,” said the BSP chief.

Basically, open finance promotes consent-driven data portability, interoperability, and collaborative partnerships among entities. It extends the principles of data sharing, security, and privacy across the different financial products.

Open finance will accelerate financial inclusion by improving access to credit and improving the tools that micro, small and medium enterprises can tap. As defined by the BSP, open finance is the extension of data sharing principles, assigning greater control to customers over their own data and enabling them to allow third party providers access to their data across multiple financial products and services.

Diokno said that accelerating digitalization during the pandemic “magnifies opportunities for wider connectivity.”

Earlier this month, the BSP formally formed the OFOC TG as the interim governing body to lead the establishment of an open finance ecosystem in the country.

The committee’s primary and alternate members represent the universal and commercial banks, thrift banks, rural banks, digital banks, e-money issuers, operators of payment systems and financial technology or fintech sector.

The members of the OFOC-TG, which will serve for a two-year term, have the responsibility to facilitate the initial policies and standards formulation. They will also support pilot implementations under the open finance regulatory sandbox.