PhilSys - the Identity Operating System

Hi Readers,?

As a business operating in the Philippines, gear up for PhilSys. It has taken time but PhilSys is here for good and it will fundamentally change the way you do business.?

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We at IDfy have always been bullish on the PhilSys. But do you know a fintech stalwart who joins us in championing the cause of PhilSys? It’s none other than Todd Schweitzer, who is the CEO and Co-Founder of Brankas. Todd is a pioneer of digitisation and open banking in the ASEAN region and is one of the strongest voices evangelizing the democratization of financial services in the region. Brankas is known for its path breaking work with various regulators, such as MAS and BSP, in creating the rails for open banking. Brankas is working with many banks in the Philippines, Indonesia, Thailand and Vietnam to make the dream of open banking a reality.

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When we asked Todd about how specifically PhilSys might change the consumer banking landscape in the country, his was very clear.

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“In the future, we foresee all major banks in the Philippines using PhilSys as the default method for authentication and KYC. With an authentication system rooted in the National ID system, banks will be able to service and provide loans, open new accounts, provide cash assistance, disburse funds, and other relevant functions through PhilSys.”

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According to our thesis, this is a natural progression. Any framework with such a broad scope cannot legitimately function without a solid legal framework behind it, something that PhilSys has secured through the numerous laws and executive orders backing it.

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With stringent compliance and regulatory requirements, financial services institutions are more likely to adopt an authentication system backed by the law of the land rather than one that isn’t. With PhilSys, banks and other financial institutions get the assurance of a legitimate identity framework, more importantly, look to adopt downstream use cases that can help them prevent fraud and money laundering.

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We pressed Todd further and asked him how he saw this materializing. He explained, “The PhilSys stack contains three core functions required for nearly all digital services — the ability to verify identity, the ability to send and receive money, and the ability to validate trust for data sharing. This contributes to it being a viable payment and authentication component in digital banking and other industries including utilities, insurance, and retail.”

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With PhilSys, these enabling components are already in place, and businesses must realize how this will fundamentally change how they acquire and service customers. But what does this mean in terms of actionable next steps? Let us look at this with an example that is now considered the poster child for a nation-scale digital transformation.

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Back in 2011, when IDfy started working with Indian financial institutions, the Aadhaar identity framework was still in its infancy, the now ubiquitous money transfer protocol called the UPI was non-existent, and there was scant guidance on identity verification methods. Given the vast unbanked population of the country, Indian financial institutions sensed that something exciting was on the horizon but couldn’t articulate how they could use it or how it would benefit them.

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Over the next 11 years, a robust framework emerged that combined the UIDAI’s Aadhaar-based identity and the NPCI’s UPI interface that enabled instant money transfer through mobile aliases of bank accounts. If you were to rewind to the India of 2015 and fast forward to today, you would see Todd’s statement unfolding like a prophecy. We at IDfy believe that with PhilSys, the equivalent moment for the Philippines has now well and truly arrived.?

We believe this will unfold as a series of related events, which would start with the widespread adoption of PhilSys by end-users through large-scale, government-backed enrolment programs. With the PhilSys seeded amongst end users, businesses - particularly banks and financial institutions will start using PhilSys-enabled KYC mechanisms and aggressively embed it in their broader fraud prevention framework. The ease of availing services and financial products via PhilSys will strongly incentivize end users to link their PhilSys to their bank accounts and e-wallets, priming the entire ecosystem for the next paradigm shift - that of a retail payment interface that enables end users to send and receive payments to ay PhilSys-linked account of an individual or a business. In short - a complete transformation of the way users will interact or transact with businesses.?

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Todd rounded it all up by summarizing, “This not only gives consumers faster banking, payment, and sign-in services, but also a more secure protocol that can be used across industries”. Truly, PhilSys is a protocol – a standard for interoperability across industries and sectors. Businesses should seize the moment and look at concrete ways to embed the PhilSys framework in their companies – from customer acquisition to fraud prevention and AML compliance.

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IDfy has made this journey alongside a few of the best-known companies in India, helping them navigate the Aadhaar-based authentication framework.?

Do write back on [email protected] or message me on Hrishikesh Ladikar , and I would love to have a conversation about how we can help your business do the same as PhilSys evolves over the next months and years.