Feature Post


A quick look: Open Banking around the world

So, what is happening with respect to Open Banking around the world? Alot!


The four forces of change continue to drive innovation:

  • Social
  • Political
  • Economic
  • Technological

I am a technologist first (banker second), and for me, technology is (and has been) the core driver for change. Of course, all of them affect financial markets and businesses equally however post COVID era is pushing for change exponentially.

A comparison of open banking initiatives around the world is interesting to see conducted by Bank for International Settlements [1].

On one hand from the perspective of Open Banking use cases, and what products & services are being offered using the open banking platforms, such as:

  • Banking product and service related information; sort of a general inquiry
  • Banking Account and Balance Inquiry
  • Funds Transfer Request

And on the other hand, the approach taken by those economies on how to apply open banking, such as:

  • Countries where Open Banking Compliance has been made mandatory by the regulator
  • Or, Formal rules and regulations introduced for Third Party Providers (TPP)
  • Or, a General Governance Framework
  • Or, countries who have taken steps to standardize Open Banking APIs
  • Or, just that Open Banking is being driven by the demand and competition in the market, countries such as UK

Most importantly, these initiatives allow payment service providers (PSPs) to offer services via digital channels. For example, products and services that previously may have required a visit to a bank branch and interaction with staff at a bank can now all be delivered via application programming interfaces (API). Examples include

  • consumer loans,
  • mortgages,
  • car loans,
  • account statements
  • and tools that analyse spending.

How European Union (EU) is responding to Open Banking

European Union (EU) is the region who is at the forefront of Open Banking and leading the way. Not only they have introduced formal regulation for third party providers (TPP, AISP, etc), but also made compliance to Open Banking mandatory, using Second Payment Services Directive (PSD2).

Currently FinTechs are booming and providing Account Aggregation services, Spending Habits, as well as Funds Transfer capabilities using Open Banking APIs.

Note that, perimeter depicted in this figure represents the scope of PSD2, which applies to payment services only. Individual jurisdictions within the EU may choose to broaden the scope of their Open Banking frameworks beyond the requirements of PSD2.

UK with a clear Open Banking approach

In the UK, a common market-wide API standard has been defined already, in order to allow for a seamless implementation. In addition, the UK Open Banking project has defined further standardized elements to help UK based PSPs to comply with PSD2 and the associated regulatory requirements defined by the European Banking Authority (EBA). [2]
The Open Banking standard set has been implemented across 90% of the UK payments account market and will allow third-party providers (TPPs) to offer competitive services across customers’ accounts held at their own bank.
UK Open Banking approach is aimed at improving competition in the retail banking market, therefore may eventually lead to an increase in peer-to-peer (P2P) payments.

Australia in the field of Open Banking

Compliance to Open Banking has been made mandatory in Australia, however they are yet to offer Funds Transfer related services. Generally, bank Product and Services related offerings are in place besides Account Aggregation services [3].

FinTechs in Australia is quickly picking up in that area as well, and data that could be shared with third party providers now include:

  • Personal: information such as phone number, email and address.
  • Account: balances
  • Product info: rates, fees and features of bank products
  • Transaction details: amounts spent

Open Banking API Framework for the Hong Kong Banking Sector

Hong Kong is providing governance framework for Open Banking in a phased approach. As well as build, the momentum towards market API standardization by generating market driven partnership. They have formulated Open API Framework as one of the seven initiatives announced by the HKMA in September 2017 to prepare Hong Kong to move into a new era of Smart Banking.

So far providing services such as account aggregation as well as funds transfer using Open Banking, along with ancillary services.

What does Open Banking mean for United States markets?

United States looks like is lagging behind and it completely at the behest of market to drive businesses into the Open Banking arena. There are however, FinTech who have started to delve into the Open Banking space however only limited to general and account aggregation services.

According to Forbes many of the payment service providers (PSPs) in the US are completely reliant on their core provider, to open banking and API enablement, such as FIS, Fiserv, and similar. However, their strategy roadmap targets some later this year (2021). Who knows? But know that there is a great Open Banking potential in the US markets.

How Open Banking is thriving in China and Argentina?

Argentina and China both are driven by an innovation-focused economy therefore Open Banking initiatives are relying on market driven partnerships. Both have the most digitally connected consumers.
Peoples Bank of China (PBOC) is reshaping of the whole value chain of banks, setting the guidelines and granted access to non-banks as well albeit on a more limited scale than for banks.
While Argentina does lag behind the two largest FinTech hubs, Brazil and Mexico, in Latin America.

Which country is innovating fastest in the Open Banking space?

Given that PSD2 and UK's Open Banking Standard were the pioneers, you would think EU reasonably is on the lead. Nevertheless, look around now, and open banking initiatives are popping up everywhere.

Hong Kong as well as Singapore, both are acting as the driving force behind Open Banking. The Monetary Authority of Singapore (MAS) is actively encouraging regional financial institutions to provide APIs in order to offer enhanced innovation and compatibility with other financial service providers.

Open Banking in the UAE and GCC markets

So far, Emirates NBD has provided open banking API sandbox so far. In addition, enabling access for budding FinTechs to play around and develop innovative solutions.

Central Bank of UAE, Dubai Financial Services Authority (DFSA) and Abu Dhabi Global Market (ADGM) continue to push for innovation in the financial services and encourage competition between FinTech startups to provide a boost to the country’s economy.

In the GCC, Central Bank of Bahrain, Saudi Central Bank (SAMA), and Kuwait Finance House are innovating within the Open Banking.

What’s next in Open Banking?

Budding FinTechs are using new creative ways to build innovative products and services, whereas for conventional banks the challenge lies in re-inventing [4] themselves and devise to new business and revenue models. For instance a PSP can look to transform into a platform provider such as Banking as a Service (look up bnkbl.com), or Distributor (Marketplaces), or a Producer such as by providing Open Banking APIs and generate new revenue streams.

This is the game-changing value proposition and the rapid growth associated with internet-based open application programming interfaces (APIs) driven platforms operating in the cloud. It is not just a matter of replicating Open Banking approach, but each economy is adopting to their own innovative ways to develop cross-industry solutions beyond financial services (think, Tink [5]). BankableAPI (bankableapi.com) is one such FinTech startup within the UAE that strives to mainstream the Open Banking by connecting banks with third party service providers rapidly.

[1]: https://www.bis.org/bcbs/publ/d486.pdf
[2]: http://www.wired.co.uk/article/open-banking-cma-psd2-explained
[3]: https://www.ausbanking.org.au/priorities/open-banking/
[4]: https://www.computerworld.com/article/3429561/what-is-open-banking-what-does-it-mean-for-banks-fintech-startups-and-consumers.html
[5]: https://tink.com/about-us/