Open banking initiatives in APAC: Opportunities and challenges for traditional banks
By Kanishk Upadhyay, Head of APAC, Wibmo, a PayU company
Technology has revolutionised every facet of our lives, reshaping how we think and act. From exchanging information and washing clothes to paying bills, preparing meals, and traveling, technology has become an integral part of our daily lives. The internet’s increasing accessibility and affordability have also driven a shift towards engaging with banks and financial service providers through various online platforms. This shift sets the stage for open banking, which aims to create an interconnected ecosystem for customers, businesses, and financial institutions to facilitate seamless transactions. In recent years, open banking has experienced unprecedented growth. This system allows third-party financial service providers to access customers’ banking and financial data, with their permission, through open application programming interfaces (APIs).
The advent of open banking is redefining the financial services landscape in the Asia-Pacific (APAC) region. This paradigm shift marks a pivotal change from organization-centric to customer-centric services, revolutionizing how data flows between different systems with customer consent. As traditional banks and fintech startups explore ways to harness the benefits of open banking, the APAC region has emerged as a hotbed of innovation and regulatory progress. This article discusses some pivotal open banking initiatives launched in some of the countries in the APAC region.
Open banking initiatives in APAC
Singapore
In Singapore, DBS Bank made headlines in November 2017 by launching the world’s largest banking API developer platform, offering 155 APIs across more than 20 categories. Startups like SoCash are leveraging these APIs to enable customers to place cash orders and pick them up from authorized merchant locations without the need for cards or PINs. Wavecell utilizes open APIs to facilitate global SMS services for financial and non-financial institutions. Additionally, the Monetary Authority of Singapore (MAS) has also played a pivotal role, releasing 12 APIs on its website in 2016 to encourage the integration and innovation of financial services.
Australia
Sydney-based startup Basiq is bridging the gap between fintech companies and financial institutions through secure data sharing. Macquarie Bank has also embraced open banking by allowing fintech startups and smaller financial institutions to access customer data with permission, fostering a collaborative ecosystem.
Hong Kong
Hong Kong has also been proactive in adopting open banking. The Hong Kong Monetary Authority (HKMA) announced seven initiatives to create a “smart banking” system, including the development of an open API policy. In 2018, Citibank partnered with six corporations in Hong Kong to accelerate the development and adoption of open APIs.
India
While India does not have specific open banking regulations, the country has made significant progress in digital financial infrastructure with initiatives like Aadhaar, the Unified Payments Interface (UPI), and Immediate Payment Service (IMPS). Companies like BankOpen offer comprehensive digital solutions for businesses to manage their finances, and Teknospire focuses on last-mile banking and financial inclusion, enabling rural and remote individuals to access banking services through open APIs.
Challenges and opportunities to be faced by traditional banks
Open banking presents both opportunities and challenges for traditional banks in the APAC region. On the opportunity side, banks can leverage open APIs to enhance customer experience by offering more personalized services and products tailored to individual needs. This customer-centric approach can lead to increased satisfaction and loyalty. Additionally, open banking opens up new revenue streams and business models, allowing banks to monetize their data and infrastructure in innovative ways. Partnerships with fintech companies can accelerate innovation, bringing fresh ideas and agile development practices into the banking ecosystem. These collaborations can result in cutting-edge products and services that meet evolving customer demands.
However, traditional banks also face considerable challenges in implementing open banking. Data security and privacy concerns are paramount, as sharing customer information with third parties increases the risk of breaches and misuse. Banks must invest in robust security measures and transparent data governance policies to maintain customer trust. Adapting to evolving regulatory standards and ensuring compliance across different jurisdictions can be complex and resource-intensive. Perhaps the most pressing challenge is the increased competition from agile fintech startups and big tech companies entering the financial services space. These new entrants often have more flexible business models and can rapidly deploy innovative solutions.
Conclusion
The open banking revolution in the APAC region presents a double-edged sword for traditional banks. While it offers unprecedented opportunities for innovation, improved customer service, and new revenue streams, it also poses significant challenges in terms of data security, technological adaptation, and increased competition. As regulatory frameworks continue to evolve and customer expectations shift towards more seamless and integrated financial services, banks must strategically position themselves to thrive in this new ecosystem. Those who successfully navigate the complexities of open banking are poised to gain a competitive edge in an increasingly digital and interconnected financial landscape.
