While Europe continues to advance its Open Banking transformation triggered by the PSD2 and CMA Open Banking regulation, other countries are observing it carefully and planning their own agendas.
In Asia Pacific, the approach to Open Banking is being driven at a country level and is somewhat fragmented for now. There is no single body of legislation as there is with PSD2 across Europe.
In some Asia Pacific countries, Open Banking is being driven as a regulatory initiative by governments and central banks. For example:
- Australia conducted the Open Banking Review in July 2017 and has imposed a phased implementation of Open Banking by July 2019 for the big four banks.
- In July 2018, the Hong Kong Monetary Authority (HKMA) published the Open API Framework for the Hong Kong banking sector. The HKMA expects local banks to deploy Phase I Open APIs within six months and Phase II Open APIs within 12 to 15 months.
Meanwhile, in other countries, the implementation of Open Banking is being led through collaboration across the industry. For example:
- The Monetary Authority of Singapore (MAS) is not compelling banks to share banking data. However, it sees the benefits to Open Banking and is supporting an organic approach to its adoption. In November 2016, MAS and the Association of Banks in Singapore (ABS) published a Financial Industry API Playbook to guide banks and fintechs in developing Open API-based services. Since then, several banks (e.g., DBS, OCBC) have made their APIs available through external developer portals.
- In New Zealand, on behalf of the government, Payments NZ is coordinating an industry pilot of Open Banking with participation from the five major banks (ANZ, ASB, BNZ, Kiwibank and Westpac) as well as Datacom, Paymark, Trade Me and Mirco.
With Open Banking, banks should be considering strategies to both attack and defend.
Traditionally, banks have been very well vertically integrated, covering all aspects of the value chain—from origination to servicing to risk and balance sheet management. But in the last few years, non-bank fintechs and tech giants have started to disrupt this value chain. Asia Pacific has a huge population of untapped, unbanked millennials who are ready to embrace new technologies and services, making it a very attractive market for these disruptors.
With Open Banking, banks should be considering strategies to both attack and defend. New digital offerings that are hard to copy and/or can be launched and scaled at speed can unlock new value pools. Yolt in the United Kingdom is a good example of this. In Australia, an Open API integration between NAB and Xero is helping NAB defend its SME business: It enables new service propositions such as cloud-based bookkeeping for their SME customers, including instant online approval for business loans.
The next battleground for banks in an Open Banking world will be with industry ecosystems. There will be a range of opportunities for banks to partner with other corporates to create new value propositions. These will span a range of industries including telecommunications, energy, transport, retail and leisure, and will target customer journeys in completely new ways.
Thanks for sharing your thoughts on the open banking system.