BBVA API Market
Open banking has changed the rules of the game in recent years, promoting the creation of new increasingly competitive digital ecosystems in which traditional actors coexist with revamped products and also new players committed to innovation. In Europe, PSD2 has been a key driver in recent quarters, but how is open banking progressing in the rest of the world? In this article we analyze the situation in America. In this one, conversely, we highlight some of the most outstanding milestones of the last year for Asia and Oceania.
The debates for the implementation of open banking in this country began in 2017 with the formation of a commission to study the regulation of consumer data protection rights (Consumer Data Right), within which it has framed its whole open banking initiative. In 2018, the Government accepted the recommendations made by this body and in August 2019, the Parliament approved the data regulations in the field of open banking.
Thus, the banking sector, along with the energy and telecommunications sectors, has been the forerunner in applying the Law on consumer data that the Government plans to continue implementing progressively throughout the Australian economy.
Since then, a beta phase has started where Australia’s four major banks (CommBank, ANZ, Westpac and NAB) have started sharing data related to credit, debit, savings and checking accounts, which will be completed with information on mortgages and loan products. It is expected that from July 2020 end consumers may authorize these banks to share this information with external providers. In addition, from that date smaller banks must also begin to open to the competition access to the data of those clients that so authorize.
The Hong Kong Monetary Authority (HKMA) launched the Open API framework for the banking sector in July 2018. This framework allows financial institutions to develop their APIs and adopt them as a new way of doing business and creating products and services for their customers. The autonomous government of this Chinese territory intends for this new regulation to be applied in a “strict, prudent and staggered manner” and therefore established four phases.
In phase one, launched in January 2019, at least 20 retail banks have made available more than 500 Open APIs in the provision of various services such as foreign exchange rate information, deposit rate and loan product comparison. Both websites and mobile apps are already using these APIs in the services they offer to end users, as reported by the Hong Kong Monetary Authority. Phase two, which started in October 2019, is very similar to the previous one and involves the same retail banks. This time the technology is focused on processing requests for products and services.
The remaining two phases, focused on standardizing data definitions and data transfer processes, are currently under development. The objective, as in Europe with Strong Customer Authentication or SCA, is to achieve accurate data aggregation and improve customer confidence in the use of related services. The HKMA will therefore be working with the industry on the details of API standardization over the coming months with the aim of publishing a set of technical standards during 2020.
This is the context in a territory that, unlike the case of Europe or the United Kingdom, consumers object much less to the basic premise of open banking, which is the consumer sharing their banking data. According to a Deloitte survey, while 69% of British users declared they had “issues” with agreeing to share their bank details with third parties, only 31% of Hong Kong consumers would refuse to do so.
This Asian country made several amendments to its Banking Law in 2017 and 2018 to adapt to the open banking wave. The government Financial Service Agency (FSA) established an authorization process for TTPs (Third Party Providers) external providers, new players and FinTechs, introduced an obligation for banks to publish their Open APIs policies, and encouraged banks to contract with at least one TPP by 2020, as Deloitte reports.
However, according to some experts in contrast to what happens in Europe or the United Kingdom, the Japanese regulation lacks clarity on data portability, and implementation of open banking components among Japanese companies remains voluntary. However, according to the same source, roughly 130 chartered banks in Japan, among the 140 largest, have plans to open up APIs by mid-2020.
We will have to be aware of whether this is finally the case, since the above takes place in a complex context, in which on the one hand, 80% of transactions are still cash-based and, on the other hand, there is a high concentration of providers of electronic payment services: out of the 59 registered, the top five held 75% market share, according to Norbert Gehrke of Tokyo Fintech.
To open the doors to open banking implementation, New Zealand has turned its eyes toward projects in the United Kingdom and Australia, Commonwealth nations and the oceanic archipelago. The government’s stated objective is to strengthen the system, increase competition, and reduce the costs of financial services.
To achieve this, as early as 2018, the government backed a pilot plan, which included big banks like BNZ and ASB and tech companies like TradeMe, Datacom and Paymark. These financial and fintech entities formed the association that is today named Payments NZ. This group has explored the design and development of common APIs related to payments and has also worked on establishing an operational framework to manage the use and iteration of the new data exchange technology. Standardization is, as always, paramount in national open banking strategies.
The results of that pilot plan were successful and in May 2019 this industry association enabled the new API service: one for payment initiation, and another for account information. Both already available for use in its API Center. There are two ways to take advantage of these APIs: as a registered standard user or a contributor. Standard users are organizations that join as API providers or as third parties, depending on whether they want to provide their own endpoints or consume those shared by other users. The provider register is intended for developers and professionals, who have a sandbox for their tests.
This country is the pioneer in implementing open banking in the Asian region. Its leading position is based on two pillars: its digital ecosystem, ideal for fintech companies; and the adoption of APIs, according to a study published by the Emerging Payments Association Asia (EPAA).
The Monetary Authority of Singapore (MAS) was the first to provide guidance and a legal framework for open banking in this part of Asia. In 2018, MAS launched APIX, a new digital innovation ecosystem with APIs related to data regulation. Currently, APIX is now a platform, which tracks APIs by category and function. So far, it has registered more than 120 transactional APIs and almost 200 informative APIs.
At least 50 financial institutions and 140 fintech companies now rely on APIX technology to scale their financial products in a secure digital environment. In addition, large Singaporean banks, such as DBS, OCBC, and UOB, are already working with these technology companies or TTPs to launch apps that use their APIs.
This small Asian country has also recently launched a fintech aid package in light of the scenario caused by the COVID-19 emergency. This aid includes 6 months free access to APIX for these startups, as well as financing and training grants for their employees.
In August, all this will be discussed at ‘APIdays Singapore 2020‘, which will bring together more than 600 financial experts and startup technicians.
Open banking has changed the financial paradigm as we have known it so far. The widespread use of new digital platforms, connected devices and technology consumers has led to a boom in business opportunities for every company, many of which are already leveraging their benefits as much as possible.
The digital transformation has not been fully implemented in the automotive sector yet, at least not as quickly as in other distribution sectors. APIs can be this sector's best ally by speeding up its digitization, especially in those areas involving the purchasing process.
In just one year, the second European Payment Services Directive—or PSD2 as it is better known—has created a new scenario combining innovation and security, in which banks have been progressively opening up access to their infrastructure to third parties.