Who is ready to open? Open Banking World Overview

Open banking is one of the hottest topic in the world of finance last year. From 14 September 2019, all banks will have to ensure compliant with the Payment Services Directive 2 (PSD2). But open banking is not just about the European Union. Check what kind of initiatives related to open banking are taken around the world.

We can find two kinds of a driving force for development of open banking initiatives. First of them – regulatory. Regulator force banks to open up to third-party providers. The first obvious example is the European Union – PSD2 directive make that right now work on APIs interfaces is ongoing across Europe. But this is not the only place next to you to meet formal API regulation – in this group we have also Australia. The second force is market-driven initiatives. Banks recognise the need for changes and possible benefits that may result from establishing cooperation with TPP. They take the initiative and establish strategic cooperation with fintechs. Such market-driven changes often (sooner than later) become supported recommendations at the national level, which are another factor developing initiatives related to open banking.

APAC region

Singapore already in 2016 has made moves to get closer into open banking.  Document “API Playbook” is a large road map with specifies API guidelines and use cases. The document was created in cooperation with the Association of Banks in Singapore and support introduction open banking and exchange of data between banks and third parties. Standards introduced in Singapore have become a model for the entire APAC region for similar projects.

In Hong Kong, the HKMA (Hong Kong Monetary Authority) want to maintain the region’s high level of innovation and retain status one of the major financial centers in the world.

In September 2017 has introduced a 4-stage Open API Framework Initiative. It assumes the creation of security and architectural standards. The organization itself provides 130 APIs containing financial data. Next to that, three years ago the largest banks operating in this region started to create new products based on open banking APIs and establishing strategic partnerships with TPP (such activities were undertaken, among others, by Citibank or HSBC).

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Japan also undertakes activities supporting the development of open banking services. They standardized several processes (e.g. the process of becoming a TPP), obligate banks to publish API documentation and connect to at least one TPP before 2020.

Australia is an example where, as we mentioned, the development of open banking is driven by legal regulations. July 2019 is the deadline in Australia to complete the first phase of open banking – until then the largest national banks must be open up to third parties. The report published this year contains several recommendations that provide information on further steps, necessary regulations, data sharing and security standards.

North America

North America is a perfect example of a solution where open banking is driven by market forces. The federal authorities are not issuing specific standards for open banking. The banking sector in the United States is highly fragmented and based on various state regulations. This status quo make implementation of open banking more complicated. So what are the leading US banks doing?

They are aware of the meaning of open banking and perceive TPP’s activity in the area of innovative banking services (TPP use mainly screen scraping techniques to obtain the necessary data services). Banks do not to be left behind in the battle for customers and start to open themselves on their own initiative and creating an API-based offer.

In Africa at the moment, none have decided on obligatory regulations that could drive the development of this initiative from the formal side. However, the changes that are taking place in the EU are closely watched and sooner than later, we can expect more or less formal government solutions.. On the other hand, initiatives emerging from the market to establish cooperation between private institutions and Fintechs, based on the concept of open banking, regardless of whether any standards are introduced.

The world of financial services is changing dynamically. Looking at the number of initiatives undertaken in various parts of the world, one can assume that open banking will soon become a global standard and ecosystem of the financial world is rebuilding right now.