Open finance pilot now live, on track – BSP
The projected timeline of the Bangko Sentral ng Pilipinas’ (BSP) PH Open Finance Pilot is on track after entering the pilot production activity or the “live” phase this month, based on an update on BSP’S initiatives in promoting a responsible and inclusive digital economy.
Open finance is basically the extension of data sharing principles that allows financial customers to have control over their own data.
An open finance ecosystem holds immense potential for all sectors, particularly micro, small and medium enterprises (MSMES) because it will promote financial inclusion by helping the unbanked, especially those with little or problematic documentation. With open finance, the small borrowers will be able to build a financial profile and credit history and, over time, access loans and other financial services, according to the BSP.
The pilot project, launched last June 21, 2023, has set a target of Nov. 1 to do its production phase. Pilot production will be the same steps as the previous phases except that it will be in a live environment.
The pilot develops technical and operational standards for an open finance ecosystem in the Philippines.
The pilot program is a collaborative project on a voluntary basis to explore the use of application programming interface (API) technologies in the delivery of financial products and services which will be responsive to the needs of customers.
The pilot production activity will run from Nov. 1 until Dec. 29 this year. By January 2024, the BSP should already be in post-production phase.
With the completion of the timeline, this puts the Philippines on the map when it comes to open finance, according to the World Bank’s International Finance Corp. (IFC) which supports the pilot in developing technical, operational standards and arrangements.
IFC said open finance will make the country’s open banking system stronger and at par with more advanced markets such as Singapore, the United Kingdom, and the European Union.
Since its launch date, the BSP allotted more than three months for the provisioning and set-up activity phase for the pilot and another two months for the transaction exchange and reporting activity.
The last two months of 2023 is dedicated for the production activity after the year-long preparatory stage which started in January this year until the testing phase in July to October.
The central bank is one of the first government agencies to digitize its reportorial requirements, develop digital platforms, and employ various artificial intelligence integration projects.
BSP Governor Eli M. Remolona Jr. said digitalization is a matter of efficiency and competitiveness for the banking system. For now, he highlights two frameworks in place that BSP is implementing, the regulatory sandbox and open finance to bring digitalization to another level.
Remolona has said that BSP is also a consumer using open finance and API after implementing a unified regulatory and supervisory technology or Regtech/suptech solution called Advanced Suptech Engine for Risk-based Compliance (ASTERISC*) that BSP adopted on January 1, 2023 to strengthen the industry’s cybersecurity through technology-based supervision.
The BSP stressed that the pilot is voluntary to allow financial institutions to co-develop an open, interoperable and scalable ecosystem that empowers consumers to take more control over their financial data and enable them to access a range of financial products and services from different providers.
Under the central bank’s rules and based on the 2023-2027 revised Open Finance Roadmap, only eligible Bsp-supervised financial institutions will participate in the pilot.
The pilot is supervised and guided by the Open Finance Oversight Committee Transition Group (OFOC TG) and a 19-member sub-working group or Standards Consultation Working Group (SC WG)
The BSP has been engaging industry collaboration and competition. The IFC has also been advising the BSP for the pilot project. The World Bank, on the other hand, provides technical assistance in building capacity and consensus across concerned government agencies.
The activities of the pilot will be governed pursuant to Circular No. 1122, and monitored by the OFOC TG.
The central bank previously announced plans to pilot test at least three use cases for its open finance framework such as account opening, direct debit payments and fund transfers.
Open finance can offer both businesses and individuals better financial products and services as well as provide financial institutions the opportunity to reduce their transaction costs, said the BSP.
The pilot involves specific activities per phase and stage. The first phase, as explained by the BSP, is a pilot preparation phase where the standards definition happens.
The SC WG reviews, agrees and delivers the pilot arrangements which are rules, standards, processes and infrastructure requirements.
It is the pilot participants that prepare their respective infrastructure. During the pilot testing phase, the participants exchange data among themselves via APIS after they are duly registered, provisioned, and set-up.
At the moment, the pilot is in production stage until end-december 2023.