The Philippines’ central bank has presented a three-year strategy to get open finance off the ground in the South-East Asian country, with policy goals including improving economic resilience and financial inclusion.
Open finance aims to boost innovation and competition by enabling third parties, such as fintech companies, to use customers’ financial data (with their permission) to develop new apps and services. It is seen as an extension and deepening of the data-sharing principles that are fundamental to the narrower field of open banking. Both open finance and open banking are global trends, with state authorities across the world adopting different routes to incentivisation and regulation.
Almost one year after setting out plans to form the Philippines’ Open Finance Oversight Committee (OFOC) to lead on governance matters such as the development of application programming interface (API) standards, Bangko Sentral ng Pilipinas (BSP) has this month launched its ‘Open Finance Roadmap 2021-2024’.
The roadmap sets out actions including the development and adoption of industry-accepted standards under what it calls a ‘test-and-learn’ approach, as well as the creation of an Open Finance Oversight Committee Transition Group (OFOC TG) to facilitate initial policies and standards formulation. The industry-led group comprises representatives from different types of financial services providers, ranging from universal and commercial banks to rural banks and the fintech sector.
The OFOC TG, which will also support pilot implementations through an open finance regulatory sandbox, is ‘expected to carry out its activities for a term of no longer than two years from its inception, or upon the establishment of the OFOC’, the BSP states.
Looking to make open finance ‘fly’
OFOC TG members joined financial institutions and third-party providers (in the regulatory sandbox), as well as representatives from the World Bank (WB) and International Finance Corporation (IFC) at a virtual event to mark the start of what the BSP refers to as a ‘transformational endeavour’.
The IFC’s country manager, Jean-Marc Arbogast, described open finance as “aiming to provide customers with greater choice and control over how they interact with financial institutions”, saying that it “can lead to deeper and more dynamic markets, in which customers enjoy a better experience, more choice, and better access to a range of financial products and services.”
He said open finance can help with financial inclusion in the country, which has a population of about 109 million, by improving access to credit, the tools available for micro- and small businesses to manage day-to-day finances and transactions and help alleviate the lack of digital documentation among Filipinos.
“We must fully recognise the breadth and depth of open finance as it would entail a wide-ranging scope of activities covering a broader array of financial products and involving multiple stakeholders across the financial sector,” said the Manila-headquartered central bank’s assistant governor, Lyn Javier.
“As part of the core team that will drive this open finance initiative to impactful and life-changing opportunities for the ordinary Juan and Maria, all of us should mark this event with a sense of duty and responsibility to our nation and countrymen in elevating the level of financial inclusion and at the same time, maintaining the integrity of the entire financial system,” added the BSP’s deputy governor, Chuchi Fonacier.
Long Pineda, primary representative of the digital banks, said the companies’ priority was to provide “provide customer-centric financial products and services”, adding that “with this in mind, I don’t see why we cannot make open finance fly.”
Open finance and open banking were included in the BSP’s 44-page ‘Digital Payments Transformation Roadmap 2020-2023’ published in October 2020.
Saudi Arabia’s open banking era underway
Meanwhile the open banking era appears to be underway in Saudi Arabia, with a Riyadh-headquartered fintech company announcing last week that it has secured ‘regulatory permission’ for its open banking solution.
Global Government Fintech reported one year ago that Saudi Arabia’s central bank (SAMA) had issued a roadmap to launch open banking in the first half of 2022.
Rabet Financial said its open banking solution had completed a ‘rigorous process to demonstrate compliance with the mandated regulatory requirements and extensive testing’ in SAMA’s regulatory sandbox. It also announced that it has been working with established banks Saudi National Bank (SNB) and Bank AlJazira to connect them to the open banking ecosystem.
“Open banking is a field where financial institutions and fintechs can collaborate productively by taking a customer-centric approach for the ultimate benefit of consumers and businesses,” said Rabet’s chief executive, Faris Albugami. “We are grateful to SAMA, SNB and Bank AlJazira for the opportunity to demonstrate that, by working together, we can increase the agility of the sector and achieve the central bank’s objectives faster.”
Separately, SAMA has launched the first version of an ‘open data platform’, which contains economic, financial and monetary statistics and indicators for Saudi Arabia. The authority said it plans to develop and improve its features.
Open banking in UK hits 4.5 million users
Meanwhile, in the UK – widely seen as in the vanguard globally in developing an open banking ecosystem – there are now 4.5 million ‘regular’ users of open banking, according to the country’s Open Banking Implementation Entity (OBIE).
OBIE – established in 2016 by the Competition and Markets Authority (CMA), a non-ministerial government department, with the country’s nine largest current account providers (known as the CMA9) required to create and pay for it – last week published the data to coincide with the fourth anniversary of the European Union (EU)’s Payments Services Directive 2 (PSD2) making open banking a regulatory requirement in the UK.
Of the 4.5 million, 3.9 million are consumers and 600,000 are small businesses, according to OBIE.
Global Government Fintech has revealed a series of developments over the past 18 months about how the UK government is starting to incorporate open banking into its own operations: specifically, HM Revenue & Customs (HMRC)’s engagement of fintech company Ecospend to enable the payment of a growing number of tax types by open banking.
OBIE predicts that more government departments will adopt open banking.
Global Government Fintech’s dedicated open banking / open finance section
‘Philippines looks to “industry-led” approach to open finance’ – our news story (2 Feb 2021) on the BSP’s draft circular to create the Open Finance Oversight Committee (OFOC)
‘Saudi Arabia to launch open banking in 2022’ – our news story (18 January 2021) on SAMA’s roadmap for the rollout of open banking