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Open Finance Framework Rolled Out for the Philippine Fintech Sector

The Bangko Sentral ng Pilipinas (BSP) mentioned recently at a private-sector event that the implementation of the Open Finance Framework will result in more customer-centric financial products. According to the BSP Governor, the underlying concept is that customers own transaction data, and consumers will have the ability to grant access to their financial data and access customer-centric products.

It is noted that developing customer-centric banking products and services will take some time, but with more access to consumer data, banks and third-party providers will be able to tailor banking products and services, investments, pensions, and insurance to what consumers need. The BSP Circular No. 1122, also known as the Open Finance Framework, that has been issued in June, is part of the BSP’s Roadmap for Digital Payments Transformation.

The framework sees customers as owners of their transaction data, which can be shared if they wish to do so. With more data shared, FIs and third-party players are incentivized to adopt a customer-centric product development cycle.

– Governor, Bangko Sentral ng Pilipinas

OpenGov Asia reported that the BSP’s Digital Payments Transformation Roadmap 2020-2023 (DPTR) says that its thrust to promote financial inclusion and digitalisation of payments is mutually reinforcing: they go together, each enabling the other. With the sudden onset of the COVID-19 global pandemic, the shift towards digital payments has become imperative as physical distancing rules become the norm under the “New Economy” environment. By using digital payments with due care and vigilance, Filipinos reduce the need for mobility and prevent health risks from face-to-face and over the counter (OTC) financial transactions. The greater usage of digital payments will also facilitate the growth of Fintech businesses engaged in e-commerce businesses as the consumption of goods and services is increasingly driven by online purchases.

The BSP describes open finance as a consent-driven data sharing scheme that adheres to the same data security and privacy standards among banks, other financial institutions, and third parties for financial solutions such as real-time payments, financial transparency options for account holders, marketing, and cross-selling opportunities.

The BSP is partnering with the private sector to establish an Open Finance Oversight Committee (OFOC), a self-governing body led by the industry. This body, which is expected to be completed within a year, is tasked with adopting, updating, and enforcing the rules of conduct for an open financial system.

The OFOC will establish its standards and procedures, as well as promote “non-discriminatory membership” that will include banks, non-bank financial institutions, electronic money issuers, and payment system operators, as per the central bank.

The BSP’s three-year digital payments transformation roadmap includes open finance and open banking, to convert at least 50% of total retail payments to digital form and onboarding at least 70% of Filipino adults to the financial system. Also known as open bank data, and it provides information to third-party financial service providers using application programming interfaces, or APIs.

In addition, a cyber security firm has confirmed that the Philippines has the highest percentage (37%) of new e-wallet users. This was followed by India (23%), Australia (15%), Vietnam (14%), and Indonesia and Thailand, both with 13%. The cybersecurity firm also claimed that China has been a leader in digital payments since the country began using e-payments before the pandemic.

The study, titled “Mapping a Secure Path for the Future of Digital Payments in APAC,” gathered 1,618 responses from people all over the region. It investigated their attitudes toward digital payments as well as the factors that influenced their decision to use fintech.

Despite the rise in digital payment adoption, the cybersecurity firm noted that cash remains dominant, with 70% of respondents still using it in their daily transactions.

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