The Philippines’ central bank has proposed the establishment of an ‘industry-led’ self-governing body as it looks to encourage the development of open finance.
Open finance describes the extension of open banking data-sharing principles to enable third-party providers such as fintech companies to have access, with permission, to customers’ data across a wider range of financial sectors and products.
The Bangko Sentral ng Pilipinas (BSP) set out plans in a draft circular to create what would be known as the Open Finance Oversight Committee (OFOC) to lead on governance matters such as the development of application programming interface (API) standards.
The nine-page circular outlines how the BSP would envisage open finance developing in the country, including a ‘tiered’ implementation by data sensitivity, data type and data holder type. It says that the tiers would not necessarily be sequential, and multiple implementations may occur simultaneously
‘The BSP sees the value of placing the governance of the industry into a single body with explicit formalised self-governance structure where the industry standards and inter-participant business rules are housed,’ says the circular’s explanatory note.
BSP reviewing more than 500 responses
The BSP told Global Government Fintech this week that it reviewing more than 500 responses received to its draft. The final version will go through several review and approval processes within the BSP before it is published as a circular for implementation.
OFOC, which will be overseen by the BSP, would then be established after guidelines for the adoption of the country’s open finance framework have been finalised.
‘Since its adoption in advanced economies in 2018, open banking has begun to spark transformative changes in the digital finance marketplace by breaking down data silos and opening up access to data to a wider range of users,’ the circular notes. It continues: ‘Middle- and low-income countries are now starting to explore the promise of open banking [which] has further led to the launch of products and services that extend to other services beyond bank accounts, revolutionising the way consumers and businesses use financial services […]. The BSP also recognises the transformative benefits that can be derived from “open finance”.’
The OFOC would ‘promulgate its own membership and participation rules and formulate its own standards and procedures’, according to the draft proposal.
‘Industry-led’ approach differs from UK
In taking an ‘industry-led’ approach, the Philippines – which has a population of about 108 million – would be taking a different route to that of countries including the UK, where the country’s nine biggest banks and building societies have been forced to release their data in a secure, standardised form.
The UK’s Open Banking Implementation Entity (OBIE), which was created in 2016 by the Competition and Markets Authority to create software standards and industry guidelines, announced last month that more than 2.5 million UK consumers and businesses are now using open banking-enabled products. The proposed governance regime for open finance in the UK is yet to be announced.
The Manila-headquartered BSP undertook a ‘comparative study of the regulatory landscape in other jurisdictions’, according to the draft circular, as well surveying BSP-supervised financial institutions for their views on what approach the Philippines should take. But while the central bank did consider the mandatory approach on open banking adopted by the UK, and other jurisdictions, a collaborative approach was “currently viewed to be more appropriate”, the BSP said.
Sandbox to encourage fintech innovation
Open finance and open banking were included in the BSP’s 44-page ‘Digital Payments Transformation Roadmap 2020-2023’. The strategic document, published in October last year, outlined an overall aim of ‘shift[ing] mindsets towards utilising digital payments’, as well as focusing on areas including financial inclusion.
As part of the country’s move towards digital finance, plans are also progressing towards the creation of a regulatory sandbox – a trial-and-error testing space in which fintech projects can be undertaken with real clients without the risk of infringing financial regulation.
As well as national regulatory and private-sector organisations, the UK government – via its Prosperity Fund ASEAN (Association of Southeast Asian Nations) Economic Reform Programme (ASEAN ERP) – is involved in its creation, according to the FinTech Philippines Association. An announcement by the trade association quotes Alastair Totty of the British Embassy in Manila as saying: “Through the financial services and intellectual property component of the ASEAN ERP, the UK is delighted to support the sandbox initiative which is a key element in the country’s digital transformation, that will help promote innovation and collaboration, and scale up business opportunities and sustainable economic recovery.”