EMERGING PAYMENTS ASSOCIATION ASIA OUTLINES HOW ASIA PACIFIC CAN LEAD INNOVATION IN OPEN BANKING
Open Banking promises innovation and competition; more seamless and frictionless user experiences
24 out of 51 markets in the region are ready for Open Banking
Singapore, February 14, 2020 – The Emerging Payments Association Asia (EPAA), the leading pan-Asian payments association in Asia, has released a ground-breaking research report on Open Banking in APAC, outlining challenges, opportunities and recommended approaches for Asia-Pacific’s financial sector. The report was presented to ABAC (APEC Business Advisory Committee) in Sydney on February 14, 2020 to assist with APEC Interoperability policy.
The report notes that there is no “one-size-fits-all” approach to introducing Open Banking, presenting an opportunity for regulators, industry and other stakeholders to collaborate in order to tailor approaches that are appropriate to the local context, and that would involve continued diversity, experimentation and adaptation.
The benefits of Open Banking include empowering consumers to control their own data, consumer choice, and creating new opportunities for competition, collaboration, and innovation. Companies such as Fintechs and Payment Technology Companies (Paytechs) are moving into this new market poised to provide innovative services to customers.
John Ryan, Director General of Policy and Projects at EPAA, commented, “The report notes that Open Banking, properly implemented, will modernise the payments ecosystem and deliver great benefits to consumers. The extent to which success can be achieved in Open Banking depends on connectivity and in particular the standards around data communication.”
Dr. Brad Pragnell, one of the lead contributors to the report noted, “Open Banking will foster innovation and competition across the sector, leading to more seamless and frictionless user experiences. Ultimately, it holds the promise of providing consumers with greater control over their data and greater choice in the products and services they use.”
The survey highlights some key focus areas for the future. This includes the importance of interoperability (including supporting cross-border capability), data standards and an appropriate role for regulators. Some of the learnings include:
1. Open Banking is inherently multi-disciplinary, and requires the coordination and leadership of regulators, central banks and government agencies.
2. Inclusive consultation and implementation processes that go beyond “big banks” to also include smaller institutions, new entrants and Fintechs.
3. Development of APIs with consideration of what has been done in other jurisdictions will be beneficial (for example, Australia leveraged the UK API standards).
4. Open Banking is more than a technology solution; it goes beyond the standards and rules around APIs.
5. Consideration of Faster Payment, Digital Identity and Consent Management initiatives will support the development of Open Banking.
Given the diversity in Asia Pacific, the roadmap for Open Banking development varies. Singapore, Hong Kong and Australia have focused considerable amount of energy towards Open Banking, followed by India, Malaysia, Thailand, Japan, Chinese Taipei, New Zealand, Bahrain and UAE. Their efforts and focus can be understood and analysed in terms of (i) Open API adoption, (ii) regulatory guidelines, (iii) Fintech ecosystem, and (iv) adoption of new technologies.
“The diversity, experimentation and adaptation seen within the Asia-Pacific and globally, combined with the potential to bring about significant consumer benefits signifies that we are still in a very early phase for Open Banking”, concluded Mr. Ryan.
Given its multi-disciplinary nature, many parties have a stake in the development of Open Banking, including but not limited to consumers, traditional banks, neo banks, neo/virtual banks, financial technology companies, technology vendors/service providers, and regulators. The set of specific opportunities and risks for each party varies, but they all point towards the need to build a robust infrastructure and ecosystem for the principal purposes of interoperability and innovation.
Open Banking – A Definition
In a recent report by the Basel Committee for Banking Supervision at the Bank for International Settlements (BIS), Open Banking is defined as “the sharing and leveraging of customer-permissioned data by banks with third party developers and firms to build applications and services, including for example, those that provide real-time payments, greater financial transparency options for account holders, marketing and cross-selling opportunities.”
This report is part of the Emerging Payment Association EPA Asia (EPAA)’s research efforts on the current state of Open Banking payments in the APAC region. The report consists of an overview of regional developments and a survey. In addition, this report is accompanied by a service and supplier directory accessible from the EPAA website – as part of an initiative to share information with readers of this report, who might be seeking information and guidance with regard to their Open Banking project.
The survey was conducted from September to December of 2019. The main target was a selected audience of enterprises and experts based in, or connected to Asia-Pacific, who were interested or involved in Open Banking. Respondents include professionals in banks, payment experts, central banks, and Paytech firms. Over 100 industry experts and professionals from Australia, India, Singapore, New Zealand, Thailand, and Hong Kong have shared their insights and perspectives in response to the survey.
In addition to surveys, literature review and interviews were conducted to analyse the landscape of the Asia Pacific region, which included status of API adoption, regulatory guidelines, sandboxes and their role in facilitating connectivity between Fintechs and banks.
Please click here to download a copy of the Open Banking in Asia research paper.
The Emerging Payments Association Asia
Founded in 2018, the Emerging Payments Association Asia (EPAA) is the leading pan-Asian payments association in Asia and has in the short time since its inception made significant waves in the payments industry. It has hosted many collaboration events, connecting over 1,000 payments leaders, driving payments’ advocacy and policy development.
Backed by an international advisory board of elected industry leaders, EPAA aims to harness Asia’s rapid payments growth and exciting potential through advocacy and collaboration. The group is an independent chapter of the UK-based Emerging Payments Association (EPA), which launched in 2004 and has more than 180 members around the world. Like EPA, the Asia chapter connects regional professionals and establishes unified, well-informed viewpoints on policies that will improve lives everywhere and encourage innovative thinking.
For more information visit emergingpaymentsasia.org. To apply for EPAA membership, contact the association by email at [email protected] or by calling +61 419 468 165.