Open banking is reshaping the financial landscape in the Philippines
The global banking and financial services industries continue to change with the deployment of open banking solutions. In the dynamic landscape of the Philippines, this development is reshaping the future of banking and fostering innovation. Let us look at how open banking is revolutionizing the financial ecosystem in the Philippines and the opportunities and challenges it presents.
Embracing open banking
Open banking is a system that allows banks to share customer data securely with third-party financial service providers through application programming interfaces, or APIs like Higala.
In the Philippines, open banking is gaining traction through the integration of more APIs, among other key factors:
1. Regulatory Support
The Philippine government recognizes the potential of open banking to boost financial inclusion and competition. It has introduced regulatory frameworks that encourage banks to embrace open banking principles, enabling them to share data and services.
As of 2021, the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, introduced Circular No. 1105, which provides guidelines for open banking initiatives.
This regulatory support has been instrumental in fostering the growth of open banking in the country.
2. Customer-Centric Approach
Open banking places customers at the center of financial services. Filipinos are looking for more personalized, convenient, and accessible banking experiences, which open banking can provide through the seamless integration of various financial products and services.
3. Digital Transformation
The Philippines has witnessed a surge in digitalization, with a growing number of Filipinos adopting digital banking solutions. Open banking complements this digital transformation by allowing customers to access multiple financial services through a single platform.
Amihan can help banks and other financial institutions in the Philippines seize the opportunity of open banking by providing digital strategy consulting or customer experience consulting services.
Our digital strategy consulting services can help banks develop a roadmap for their digital transformation, identify new opportunities for growth, and mitigate the risks associated with open banking. Our customer experience consulting services can help banks improve the customer experience across all channels, from online to offline.
Higala is an open banking API that allows traditional banks to collaborate with neo banking services for easier account opening. Developed with Talino Venture Studios, the API combines the ease-of-use experience of neobanks with the established infrastructure and security of traditional banks.
Higala allows customers to open accounts easily and pay effortlessly using various payment systems like e-wallets. Banks meanwhile, can make account lookup, regulatory, and compliance processes more streamlined through the API’s mobile-first eKYC, AML, and sanction checks.
We have a team of consultants, engineers, and data experts with a deep understanding of the financial services industry and open banking. We are committed to helping you succeed in the digital landscape.
Advantages of Open Banking
1. Enhanced Financial Inclusion
Open banking extends financial services to underserved communities and individuals, aligning with the Philippine government’s commitment to financial inclusion. This approach can bring banking services to rural areas and marginalized populations.
According to bankingly.com,” almost 44 to 50%, or 34.3 to 36 million Filipino adults, remain unbanked as of 2022.
2. Innovation and competition
By fostering collaboration between traditional banks and fintech startups, open banking stimulates innovation and competition. This results in the development of new financial products and services that better meet the evolving needs of Filipinos.
A report by Fitchrating.com indicates that the Philippines’ fintech sector has experienced significant growth, driven by regulatory changes and consumer demand. Open banking plays a pivotal role in fostering this growth.
3. Streamlined financial management
With open banking, customers can consolidate their financial information from various accounts and institutions in one place. This simplifies financial management by offering a holistic view of their financial health.
A great example of this is account aggregation. Open banking offers secure APIs for accessing financial account data and benefits all parties: banks, account owners, and fintechs. With open banking, banks have greater control and visibility into third parties that are accessing their client’s financial data and the purpose for which the data is being used.
Another example is consumer spending insights. Financial documents and data from external credit and bank accounts can bridge the gap between banking and buying, uncovering opportunities for banks to proactively engage customers. Customer life stages, psychographics, brand loyalties, and other triggers help to create personalized experiences.
Challenges for Open Banking
1. Data privacy and security
Sharing sensitive financial data must be done securely to protect customers’ privacy. Stringent data protection measures and cybersecurity protocols are essential to building trust in open banking.
According to a report from Statistica.com, as of August 2023, incidents of data breaches in the Philippines had reached roughly 1.19 million in 2022, indicating a significant decline from the peak number of incidents recorded in 2020. Increasing digital adaptation has contributed to the number of incidents of data breaches in the country.
2. Standardization
For open banking to reach its full potential, standardization of APIs and data formats is necessary. This ensures seamless communication between banks and third-party providers.
Amihan Global Strategies: Enabling Open Banking
Amihan Global Strategies, a leading technology and consulting company in the Philippines, plays a crucial role in enabling open banking. Leveraging their expertise in data-driven solutions and digital transformation, Amihan provides the necessary infrastructure and guidance to banks and fintech companies. Their experience in secure data sharing and API development for Higala aligns with the principles of open banking, facilitating its adoption and success.
Open banking is poised to redefine the financial landscape in the Philippines. As regulatory support and industry collaboration continue to grow, we can expect to see a proliferation of innovative financial services tailored to the unique needs of Filipinos. This evolution promises a more inclusive, competitive, and customer-centric banking ecosystem.
Conclusion
In conclusion, Open Banking is not merely a trend but a transformative force shaping the future of banking in the Philippines. As it gains traction, it will empower individuals and businesses with unprecedented financial opportunities while redefining how financial services are accessed and delivered. Furthermore, the end-customer benefits are substantial, ranging from the convenience of opening accounts more easily and making smoother online purchases to enjoying better access and enhanced security in financial transactions. Open Banking is ushering in an era of increased efficiency and user-centricity, promising a brighter and more accessible financial landscape for all.
FAQs
1. What is open banking?
Open banking is a system that allows banks to securely share customer data with third-party financial service providers through APIs, fostering collaboration and innovation.
2. How does open banking benefit Filipinos?
Open banking extends financial services to underserved communities, stimulates innovation, and simplifies financial management for Filipinos.
3. How does Amihan Global Strategies contribute to open banking?
Amihan Global Strategies provides infrastructure and guidance to banks and fintech companies, facilitating the adoption and success of open banking in the Philippines.
Amihan is a digital transformation partner that helps companies benefit from opportunities, enhance customer experiences, and develop capabilities through top-notch digital, data, and cloud services.
Our services include Digital Strategy Consulting, Innovation as a Service, Cloud Enablement, Infrastructure, Managed Cloud Services, and Resilient Operations. We also offer a variety of cloud and data analytics solutions.
To learn more about Amihan, please visit our website: https://amihan.net
Bernadette Valerio is a Marketing Associate at Amihan Global Strategies and an experienced graphic designer.