BSP pushes open finance network for data sharing

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has committed to protect the data of the banking public as it aims to put in place the open finance framework, paving the way for the customer-allowed sharing of financial data in the second quarter.

In his weekly virtual press conference, BSP Governor Benjamin Diokno said the proposed open finance framework would create innovative solutions for both customers and financial institutions amid the pandemic.

“It improves digital agility in the financial services space and brings competition to a new level. Greater digital agility is both a necessity and benefit of open finance,” Diokno said.

The framework is part of the broader efforts of the BSP to foster financial innovation while safeguarding consumer interests and the stability of the financial system.

Open finance refers to the sharing and leveraging of customer-permissioned data among banks, other financial institutions and third parties to build innovative financial solutions, such as those that provide real-time payments, greater financial transparency options for account holders, marketing and cross-selling opportunities.

“The open finance framework is particularly expected to address data silos and international asymmetry between traditional banks and other financial service providers, allow greater reach to more clients and partners, encourage the entry of more players and increased financial service offerings,” Diokno said.

Aside from enhancing security and transparency, the BSP chief said open finance also makes it easier and more natural for financial players to leverage on their own data internally for purposes such as service, personalization, credit scoring or even anti-money laundering monitoring.

Diokno said the open finance framework coupled with the interoperable payment schemes would enable people in every level of society to participate in the formal financial system.

“We can all agree that digital is no longer a matter of convenience. It is a necessity. We bear witness to how technological advancements and entry of new players during the pandemic changed the way we conduct most of our financial transactions, even the unbanked,” Diokno said.

The proposed framework provides for the creation of an open finance oversight committee, which is a BSP-recognized industry-led self-governing body that shall craft its own rules for membership, participation, procedures and setting of standards.

The underlying idea of open finance is that customers are the owner of transaction data, which could be shared if the customers wish to do so.

Thus, BSP formulates a policy that encourages information-sharing among financial institutions in the course of developing innovative financial services for customers.

Melchor Plabasan, director of the BSP’s Technology Risk and Innovation Supervision Department, told reporters the open finance framework espouses consent-driven data portability and interoperability.

“Based on the draft circulars, we have also ensured that the players themselves will enforce and comply with the new standards on cybersecurity, data privacy, etc,” Plabasan said.

Plabasan also said the regulator also consulted the National Privacy Commission (NPC) and its recommendations would be incorporated in the final circular to be released sometime in the second quarter.