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.