More than 71% of Filipinos remain unbanked and have zero access to financial services, based on the 2019 survey of the Bangko Sentral ng Pilipinas.
This unbanked sector includes aspiring entrepreneurs and MSMEs resulting to their inability to secure funding and support to expand their businesses. Emerging solutions are Open Finance and the API (application program interface) economy, innovations that can provide financial access to the underserved while protecting consumer data, confidentiality, and financing.
Amor Maclang, Digital Pilipinas and World Fintech Festival Convenor and FPH Trustee and Executive Director, shared her vision for what Open Finance through the participating organizations can accomplish: “We hope to be able to surface best practices that will help us transform our industry together, and in the process create a virtuous cycle that will be more pro-consumer. Through all these efforts, we aim to ladder up to a joint national Open Finance journey.”
The hurdles and solutions to financial inclusion, data protection, and consumer empowerment were addressed by Maclang and other industry leaders in the recent event, “Teching Up Consumer Financing: Consumer Protection in Financing in an API Enabled World.” The webinar was held by Fintech Philippines Association (FPH), the leading industry association on fintech in the country; and Digital Pilipinas, a movement which aims to solve longstanding business and infrastructure challenges by applying technology.
Todd Schweitzer, Founder and CEO of Brankas, expressed his enthusiasm over how the government is dealing with Open Finance and API development: “In the Philippines, they’re following a great trajectory. What they are doing is they’re building a fence and they are saying:
‘Here is the fence, the perimeter, there are certain IT and operational tech standards that need to be in place. And as long as you have those in place, we the regulators will allow innovation to happen.’”
He added why this approach is an advantage: “You’re not forcing a requirement, you’re not going through years of consensus-building with the bankers’ association, and you’re giving a green light to the more digitally focused banks to proceed. That’s the approach that the regulators are taking in the Philippines, which I think is amazing.”
In terms of real benefits to the consumers, the era of Open Finance will also introduce the democratization of data. Jerome Eger, the CEO of Smile API, an API that facilitates the rapid and secure exchange of employment and financial data, explains it this way: “Your data is yours. Usually when you see silo data these days, it is not available to you as an end-user. What APIs are about is the removal of these thresholds and to make your own data available for the best use, and in your interests.”
Rajan Uttamchandani, Chairman and CEO of Esquire Financing, a company that has specialized in financing for SMEs, explains API’s advantages: “An API economy or is an enabler. By connecting services, products, and data, practically the whole business becomes faster and more accessible for our partners and customers.”
Krishan Grover, Founder and CEO of GROVER Pte Ltd adds, “The biggest challenge MSMEs face is the ability to get access to credit. API economy does make it convenient—the customer can get all the information the was talked about, so they don’t have to wait weeks and months to collect information.”
In the era of Open Finance, even the unbanked will have access to financial services, as APIs’ functionality can check on alternative data points such as e-wallets like GCash or Paymaya.
Aside from enabling the data owner to manage their own data, APIs connect businesses to empower them to extend their reach, influence, and market: “In this day and age, if you want to be a master in your own vertical, you need partnerships, and to transact in partnerships securely and effectively, you’re going to need APIs,” emphasized Mitchell Goh, CEO of GetPaid.
Meanwhile, Vice-Chairman and Co-Founder of Fintech Philippines Association Mark Vernon talked about the road ahead for APIs and its implementation in the country “We need a credit scoring system like in the US, something that the user can submit data to, or that can be tapped form different locations. It would be nice to have an API for an online NBI clearance setup. We really need a national ID. It’s also a problem that we can’t do automated KYC (know your customer) in the Philippines.”
Given the rapid shift to contactless payments, online banking, and digital transactions in the country due to COVID-19, the collaboration of major industry players and a business climate conducive to innovation can accelerate Open Finance. For many Filipinos, unprecedented financial inclusion might soon become a reality.
For more information, click on https://digitalpilipinas.ph/.
