BSP to explore Open Finance to promote financial health

The Bangko Sentral ng Pilipinas (BSP) will explore uses for Open Finance to further promote financial inclusion by measuring financial health, collecting data on digital payments and its pricing, and giving support to legislative actions to improve internet access in the country.

In a statement Tuesday, July 2, the BSP said it is currently developing an index to measure and formulate policy interventions on financial health, as it studies Open Finance use cases that promote financial health such as open savings, insurance, pension, and retirement accounts.

Open Finance is basically the extension of data sharing principles that allows financial customers to have control over their own data. It supports financial inclusion by leveraging on data that consumers agree to share with financial institutions and third-party providers, said the BSP. These data is then used to develop “innovative financial solutions and tailor-fit products and services to their needs.”

An Open Finance ecosystem also holds immense potential for all sectors, particularly micro, small and medium enterprises (MSMEs) because it will promote financial inclusion by helping the unbanked, especially those with little or problematic documentation.

With Open Finance, the small borrowers will be able to build a financial profile and credit history and, over time, access loans and other financial services.

“These are priority initiatives that the BSP and the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development (UNSGSA), Her Majesty Queen Máxima of the Netherlands, discussed during her official visit to the Philippines” last May 21 to 23, 2024, said the BSP.

The BSP is also busy with its Innovations for Poverty Action, an international non-profit organization dedicated to fighting global poverty through research and policy initiatives.

“(BSP will) conduct a pilot study on responsible pricing, which will determine the measures on the reasonableness of fees, charges, and interest rates imposed by financial service providers on their products,” said the BSP. This was in line with the principles under the Financial Products and Services Consumer Protection Act of 2022.

The central bank is likewise in active discussion on taxes charged on digital transactions with the government, in particular the Department of Finance, to “ensure the affordability of financial products.”

In addition, the Financial Inclusion Steering Committee (FISC) chaired by the BSP, continue to support the passage of the Open Access in Internet Services Act, which is currently pending in Congress.

“Aside from enhancing web access for the unbanked populace in remote areas of the country, the proposed law is expected to promote broad-based access to welfare-enhancing digital financial services,” said the BSP. “These initiatives are expected to result in onboarding more Filipinos into the formal financial system for them to reap the benefits of a growing economy,” it added.

In July last year, the BSP launched its PH Open Finance Pilot.

The pilot is developing technical and operational standards for an Open Finance ecosystem in the Philippines. The pilot program is a collaborative project on a voluntary basis to explore the use of application programming interface (API) technologies in the delivery of financial products and services which will be responsive to the needs of customers.

With the completion of the pilot, this puts the Philippines on the map when it comes to Open Finance, according to the World Bank’s International Finance Corp. (IFC) which supports the pilot in developing technical, operational standards and arrangements.

IFC said an Open Finance ecosystem will make the country’s open banking system stronger and at par with more advanced markets such as Singapore, the United Kingdom, and the European Union.

Under the central bank’s rules and based on the 2023-2027 revised Open Finance Roadmap, only eligible BSP-supervised financial institutions will participate in the pilot.

The pilot was supervised and guided by the Open Finance Oversight Committee Transition Group (OFOC TG) and a 19-member sub-working group or Standards Consultation Working Group (SC WG)

The BSP has been engaging industry collaboration and competition since last year. The IFC has also been advising the BSP for the pilot project. The World Bank, on the other hand, provides technical assistance in building capacity and consensus across concerned government agencies.