Open Banking In Asia – A Breakdown of Initiatives Across The Regionby Vincent Fong October 9, 2018
Globally the open banking movement is gaining traction, fueled largely by EU’s P2D2 and the UK’s CMA Open Banking and a combination of banks’ internal efforts and market initiatives.
While during the earlier years, much of the open banking initiatives were largely from the European region, the rest of the world, particularly Asia is quickly catching up with open banking initiatives.
What is Open Banking?
Before jumping into the breakdown, it’s worth explaining what open banking is for the benefit of those who might be unfamiliar.
Open banking refers to the use of open Application Programming Interfaces (APIs) that enable developers to build applications and services around financial institutions.
APIs are a set of rules that govern how one piece of computer software communicates with another. If adopted, these enable banks’ customers to share their personal financial information with third parties to give birth to new services and products.
The deployment of Open Banking, in essence, breaks the bank’s monopoly on customer data and passes the power back to the consumer to decide who should have access to their data and what services can be provided based on the data.
Positive Development From Some Asian Countries
It’s obvious to state that no two countries in Asia are the same and their degree of readiness for open banking will vary from one country to another. To contextualise the performance of Open Banking in Asia let’s take a look at initiatives from some of the countries leading the way.
Singapore is often touted as the leader in open banking in this region, a report by IDC indicated that the lion city even surpasses the likes China, Hong Kong and Australia.
This is driven largely by MAS who has been laying out progressive policies for open banking as early as 2016. The regulator seems to favour a more organic approach compared to its European counterparts who have put in place deadlines for banks to comply by 2019.
Of course “organic” does not mean that the regulator is leaving it purely up to market forces, MAS published a very comprehensive API playbook in their bid to encourage more banks to participate in the initiative.
Hong Kong’s open banking journey is a little younger in comparison to Singapore, in July 2018 its regulator HKMA published the Open API guideline for banks.
To stand by their own framework, the HKMA opened up 130 sets of information that covers financial data and what they deem as important information.
The framework will only focus on retail banking in its initial stages but HKMA welcomes banks to extend it to other business lines if they deem it suitable.
For now the sets of data will also be limited to product and service information, datasets relating to account information and transaction is projected to be made available in July 2019.
Much like Singapore, Hong Kong also favours the organic approach over a mandatory approach.
One of the most recent entries to the list of countries embracing open banking, Malaysia’s regulator Bank Negara Malaysia published their version of Open Banking guidelines in September.
There are 3 areas in which the central bank is looking at for their open API initiative namely; Motor Insurance, Credit Card and SME Financing. They have also make their specifications available at their GitHub Page.
Meanwhile Maybank launched initiatives Maybank Sandbox as their answer to open banking.
Although there are no formal regulations for Open Banking in Korea compared to some its other Asian counterparts. Korea’s regulator has been vocal about their support for Open APIs.
In 2016, the Financial Services Commission of Korea launched the Fintech Open Platform. At the time of the launch they claim that there are 16 commercial banks and 25 securities companies in the platform.
However it is interesting to note that we were unable to locate the Fintech Open Platform anywhere nor were we able to find any datasets available. There are also no other updates on this initiative since its initial announcement that we could find.
Some Regulators Are Lagging Behind While Banks Are Taking Initiative
While this infographic from IDC is slightly dated (Hong Kong and Malaysia have since issued frameworks) it does provide a helpful overview on the state of open banking in Asia.
Countries like Indonesia and Sri Lanka have not issued any framework or guideline for Open Banking. However there are initiatives from banks like Bank Negara Indonesia and Nation’s Trust Bank to open up their APIs
The situation in Thailand is similar, in that no regulatory framework yet exists. However, banks are ready to work with fintech.
With many of its nearby neighbours adopting Open Banking it is likely that we will start seeing other Asian countries moving towards the same direction — either way open banking in Asia seems more like a matter of when not if.
Featured Image: Edited from Freepik