FINANCIAL inclusion is a key goal of open finance. A growing number of innovative start-ups, fintechs and banks are changing the industry with easy-to-use apps and solutions. Incompatible interfaces, however, are hampering the next steps toward further empowering customers.
The Bangko Sentral ng Pilipinas' (BSP) adoption of the Open Finance Framework seeks to address this issue by establishing a common application programming interface (API) layer that ensures a uniform and consistent way of managing information exchanges.
Consider an API as a translation module that converts incoming and outgoing data into a format that other applications and APIs can understand. The central bank wants to ensure that all players use the same set of translators, allowing for easier and reliable communication/collaboration and the rapid expansion of services.
The adoption of the Open Finance Framework aims to empower customers by giving them greater control over their personal data, in the process catalyzing the development of products and services that are responsive to their needs. This adheres to the principle that "customers are the owners of personal and transaction data," thus information can only be shared with their consent.
The framework adopts the principles of "consent-driven data portability, interoperability and collaborative partnerships among incumbent financial institutions and fintech players." This covers technology, products, services, information and policies that enable customers to securely share their data with qualified parties, either BSP-supervised financial institutions or third-party providers (TPPs).
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Not everybody will have access to the data stored by financial institutions. The BSP has established the Open Finance Oversight Committee, which will serve as an interim governing body to facilitate the formulation of policies and standards as well as the establishment of an accreditation process for TPPs and other fintech players seeking access to the financial data held by banks.
Some of the vetting requirements will be related to privacy and cybersecurity to ensure that the consumer is protected while exercising their choice to pass that data on and that it is done in a secure manner that will maintain confidence in the financial system and foster innovation.
The central bank envisions that streamlining open finance will aid the know your customer and credit underwriting processes as well as increase financial inclusion in the country.
Audrey Demika Paulene Ponce is a compliance analyst at First Circle, an award-winning financial technology company that has been supporting small and medium enterprises since 2016. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment, you may email the author at [email protected]