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FinTech experts laud Philippine Central Bank’s open finance regime

A group of fintech experts in the Philippines welcomed the Central Bank’s initiative of adopting a modern scheme that will further hasten growth and innovation within the financial and banking sectors. 

In a report, Lito Villanueva, Chairman of Fintech Alliance.PH, expressed his anticipation of a more inclusive process for banks following the adoption by the Bangko Sentral ng Pilipinas (BSP) of an open finance regime. Lito emphasised the benefits of having open finance regulations in place. These, he said, can empower the digital economy and provide better services for customers of banks and financial institutions. 

In a draft circular, the BSP defined an open finance framework as one where the Central Bank places the governance over banking institutions into a single, industry-led body. This body, which will still be overseen by the BSP, will perform a self-governing function. This way, banks can benefit from the leveraging and sharing of customer-authorized data with other banks and third-party players through innovative solutions. These include the promotion of real-time digital payments and other financial options. 

The circular mentioned that “The BSP is cognizant of the benefits of moving towards inclusive fintech ecosystems that espouses consent-driven data portability, interoperability and collaborative partnerships among incumbent financial institutions and fintech players. The BSP also recognizes the transformative benefits that can be derived from ‘open finance’, which refers to the extension of permissioned data sharing and third-party access to a wider range of financial sectors and products”. 

In implementing the finance scheme, the BSP stated that it plans to apply a three-tiered process based on data sensitivity, data type and type of data holder. These phases are not exclusively sequential, leaving the room open for multiple or simultaneous implementation.  The BSP is set to release the draft of the framework for public consultation with stakeholders and industry players. The public consultation shall be held as a form of collaboration with key institutions.  

As to the authority of the BSP to oversee the new system, the group said that the framework can be best handled by market players themselves, such that the BSP should only come in on situations where hurdles to competition in the industry are present. These barriers may include cases of refusal by any financial institution to join in interconnected systems or share its consumer-permissioned data.  

Simplifying the open banking scheme 

While the new open finance regime is still in the process of completion, the finance tech group gave suggestions on how to allow for seamless integration. It cited the possible provision of a single access point that can lead to multiple data sources and payment transaction data. 

One of the obstacles that the group anticipates is data privacy laws in the country which can prevent the open sharing of data resources among banks. These laws include the Deposit Secrecy Law and the Data Privacy Act. 

The possible remedy, according to the finance technology association, is the provision of uniform agreements outlining the rights extended to banks to share data. It also stressed, “Alternatively, the OFOC and its members can formulate their own industry Privacy Code for approval of the NPC to mitigate the risks associated with the users of personal information by open finance”. 

Collaboration for Sandbox venture 

In a separate statement, Fintech Alliance.PH and Fintech Philippines Associations have unveiled plans to team up for the launch of the Philippine Fintech Industry Sandbox. 

The undertaking has gained support from the UK Prosperity Fund ASEAN Economic Reform Programme (ASEAN ERP). Players in the fintech industry are positive that the Sandbox project will pave the way for financial institutions to get easy access to a vast number of resources like APIs and reference architecture data. 

Under the project, a number of government agencies are expected to maintain close integration with stakeholders. These agencies include the BSP. the Securities and Exchange Commission, the Insurance Commission and the Department of Information and Communications Technology. 

As earlier reported by OpenGov Asia, the BSP has been consistent in its push for a more innovative banking sector. The Philippine Central Bank has early on expressed its commitment to help address potential challenges through the adoption of risk-centred regulations in the financial industry. 

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