THE BANGKO SENTRAL ng Pilipinas (BSP) targets to finalize an open finance circular by next quarter to set rules on the sharing of customers’ financial data among institutions.

“Open finance is seen to shape the industry. It is part of BSP’s broader efforts to foster financial innovation while safeguarding consumer interests and the stability of the financial system,” BSP Governor Benjamin E. Diokno said at an online briefing on Thursday.

A draft proposal released in December showed the circular will allow for the establishment of an Open Finance Oversight Committee that will be recognized by the central bank. The self-governing, industry-led body will be responsible for its own membership and participation rules, standards and procedures.

Based on the draft, 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.”

Mr. Diokno said open finance will help address the “asymmetry” in data systems of banks and other financial service providers.

“Based on our consultations, the top use cases on open finance identified by key stakeholders revolved around customer identification, payment transaction, credit scoring and enhancing customer insight and even utilizing it for AML (anti-money laundering) monitoring and compliance),” Mr. Diokno said.

He added that some parties also expressed interest in utilizing open finance to expand data supply bank products such as insurance and entitlements.

Consumers will also benefit as open finance, together with interoperable payment systems, could lead to better financial inclusion, Mr. Diokno said.

The central bank said the underlying idea of open finance is the sharing of transaction data, but only if customers allow it.

Fintech Chairman Angelito “Lito” M. Villanueva earlier said that while the industry is supportive of open finance, the country’s data privacy laws, such as the Republic Act (RA) No. 1405 or the Deposit Secrecy Law and RA No. 10173 or the Data Privacy Act,  are major hurdles to creating a framework.

Mr. Villanueva said once established, members of the Open Finance Oversight Committee could formulate their own industry Privacy Code that would be submitted to the National Privacy Commission for approval to mitigate risks associated with accessing personal information under the framework. — L.W.T. Noble