Advantages of An Open Finance Framework
The implementation of an open finance framework may lead to the introduction of more customer-centric financial products in the country, according to the Bangko Sentral ng Pilipinas.
BSP Governor Benjamin Diokno said the framework allows banks and third-party providers to create a broader array of financial products such as banking products and services, investments, pension and insurance amid greater access to consumer data.
“The framework sees customers as owners of their transaction data, which can be shared if they wish to do so. With more data shared, financial institutions and third-party players are incentivized to adopt a customer-centric product development cycle,” Diokno said.
Open finance supports a consent-driven data sharing scheme that promotes collaborative partnerships among incumbent financial institutions and new players that adhere to the same standards of data security and privacy.
“For example, your main banking app can insert a feature that lets you add accounts from your other banks to help you monitor all your accounts. Your investing app can also let you add your bank account to let you see how much you can invest. This is the promise of open finance,” the BSP chief told participants of the European-Philippine Business Summit.
Under the initiative, the BSP aims to shift 50 percent of total retail transactions in the country to digital channels and onboard at least 70 percent of Filipino adults to the financial system.
Latest data showed the share of digital payments to total retail transactions already increased to 20 percent in 2020 from only one percent in 2013 in terms of volume and to 26.8 percent from eight percent in terms of value.
Under the framework, and industry-led self -governing open finance oversight committee will be created to craft its own rules for membership, participation, procedures and setting of standards.
The committee will include representatives from banks, non-bank financial institutions, electronic money issuers, operators of payment systems, and other relevant sectors.
It will promote non-discriminatory membership by ensuring that key areas of interest of the financial industry are adequately represented and that all participants and applicants for membership are treated fairly and consistently.
The underlying idea is that customers are the owners of transaction data; thus, data should be shared if the customers wish to do so. As such, consumers will have the power to grant access to their financial data. Doing so will shape a customer-centric product development objective.
Customers have opt-in and opt-out mechanisms when they want to withdraw or modify the scope of their consent in the open finance ecosystem.