Open Banking: Coming to a country near you

  • Posted on December 13, 2018
  • Estimated reading time 2 minutes
open banking to a country near you

In my first blog post in this series, we looked at the challenges of implementing Open Banking. However, this has not stopped other countries from adopting Open Banking principles to deliver a better banking experience for customers. There are different styles of engagement. In some countries, this is being driven by the regulators:

  • Australia: A final government report on Open Banking has moved implementation closer and set the framework for significantly better deals across a whole range of banking products (mortgages, personal and small business loans). By forward integrating into areas like real estate search – as CBA has done - or partnering with car dealers to show local inventory, banks can better link their financing products to the broader customer decision process.
  • Japan: Surprisingly, many banks have adopted APIs to compensate for poor customer experience. In the last two years, 12 banks have opened up their systems and 100 are planned for 2020 (the numbers in Europe are low by comparison). There is a strong push by JETRO (Japan External Trade Organisation) to promote FinTech trade into Japan and changes in the Banking Act so non-financial companies can now receive 5% investment from banks to set up FinTechs.
  • Hong Kong: The Hong Kong Monetary Authority (HKMA) published its draft Open API framework in January 2018, as part of a public consultation to increase the competitiveness of Hong Kong’s banking sector and recommend Open API technical standards.
  • Canada: The Canadian Government has established an Advisory Committee on Open Banking to explore both potential and pitfalls. However, the Canadian Bankers Association warned that giving third parties access to customer data could "give rise to contagion, reputational and other types of risks with broad-ranging consequences".

In other countries, the approach is more inclusive rather than mandatory, although without enforced compliance, the standardisation and adoption of APIs across the country could prove difficult:

  • Singapore: The Monetary Authority of Singapore (MAS) sees API adoption as a key foundation for innovation. Singapore is looking at Open Banking to broaden choice and foster competition. DBS in Singapore recently launched an API developer portal that makes available 155 services, including rewards, payments and fund transfers.
  • USA: Banks, FinTechs, regulators and industry working groups are moving towards ways of sharing third party data and large banks are setting up data-sharing arrangements with individual partners. US person-to-person payments network Zelle (which processed over 60 million transactions in the third quarter of 2017) is using APIs to atomize and re-bundle payments elements, and then sell them back to participating banks. For business customers, U.S. Bank is placing its Accounts Payable Optimizer app inside the Sage Live accounting platform, providing cash flow analysis to help Sage’s small- to medium-sized business customers in the US and Canada maximize their working capital and manage their cash flow in near real-time.
  • New Zealand: Payments NZ, the governance body, are developing payments-related APIs, enabling pre-payment checks and confirming account details are correct and there are sufficient funds to make a payment. Six development partners - ASB, BNZ, Datacom, Paymark, Trade Me and Westpac - are carrying out the pilot, which will be completed later in 2018.

Many countries regard Open Banking as a source of innovation and a way to increase customer choice. If your country has not adopted its principles yet, it will probably do so soon. For banks, merely complying with regulation will not cut it – in fact, such an approach is likely to be a retrograde step. There are many options available for banks. So how do you develop a strategy? That will be the subject of our final blog.

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