API technology key to financial inclusion, say fintech experts

Application Programming Interface (API) technology, which uses access points to allow different applications to communicate with each other, is the key to boosting financial inclusion in the Philippines, according to panelists at a fintech summit on Friday.

Mark Vernon, co-founder and vice chair of the Fintech Philippines Association (Fintech PH), said that “the faster sharing of data to get results” is the main benefit of API, such as when taking out a time-sensitive loan.

“API connections are needed to share data in all its forms,” he said.

E-wallets like GCash and PayMaya connect to online banking channels through API, doing away with middlemen or intermediary processors.

Bangko Sentral ng Pilipinas (BSP) released in June an open finance framework, or Circular 1122, which allows consent-driven data sharing among secure institutions.

BSP Governor Benjamin E. Diokno stated this can “ onboard more small and medium enterprises (SMEs) into the formal financial system and provide them with access to digital financial services”.

“We’re making lots of progress but we still have some way to go,” Mr. Vernon said of the central bank’s actions. “Since the companies that are sharing data are already regulated, then there should just be encouragement from government to enable it.”

In January, BSP followed up the framework by naming a policy formulation committee of industry stakeholders, represented by banks, electronic money issuers, operators of payment systems, and fintech firms.

DEMOCRATIZATION OF DATA
Allowing API technology to push the Philippines forward into a world of open finance will translate to faster, wider, and more convenient access to benefits rooted in data, said Jerome Eger, co-founder and chief executive officer of tech firm Smile API.

“Siloed data is not available to you as an end-user. What API is all about is to remove thresholds to make your own data available to the best use of your interests,” he said. “When this data in the past was owned by incumbent players, big data players, maybe sitting in another country, today it basically means you can now unlock that data.”

Smile API, launched in the Philippines in 2021, is a Southeast Asian digital platform that streamlines application processes by providing employment data.

For Todd Schweitzer, chief executive officer of open finance start-up Brankas, an API economy matters because it will be able to reach the unbanked and underserved.

“Open finance is based on two principles — one, customers own their financial data; two, customers should be able to access their financial products beyond bank-owned channels,” he said.

Brankas, a regional provider of banking-as-a-service APIs for account opening and credit card issuance, doesn’t intermediate or collect data, but “just passes it through with the customer’s consent,” as with all API platforms.

Mr. Vernon of Fintech PH agreed, suggesting that open APIs can also help with government checking of data, like in setting up online NBI clearance and National IDs.

“The open finance movement will really allow data to move a lot easier,” he said. — Brontë H. Lacsamana