The world continues to move towards open banking with some markets, including the European Union (EU), the UK and Australia, taking the lead by creating and passing favorable regulations, according to a new report by the Paypers.
In a paper, titled Open Banking Report 2019 and released in September, the company explores the current open banking ecosystem and provides an analysis of the present global state of play of open banking.
Open banking leaders
According to the research, the UK, Australia, and the EU are the “pioneers” and “the clear ‘front runners’ of open banking” worldwide.
In these jurisdictions, regulators have provided the conditions to accelerate migration towards open banking through a series of reforms aimed at releasing the financial data of consumers from the banks’ ownership and into the hands of consumers.
The development of the ecosystem (infrastructure, regulatory clarity, third-party providers (TPP) authorizations, propositional uptake) has come gradually but is now gaining pace, the reports says.
As of September 2019, there were 143 providers regulated by the UK Financial Conduct Authority (FCA) who have enrolled in open banking.
In the EU, the PSD2 European directive, a regulation aimed at promoting the development of mobile, secure and innovative payment services by opening the door to third parties for the first time, came into force in January this year, giving the final accolade to open banking in the region.
In Australia, by no later than February 1, 2020, all major banks must provide access to consumer, account and transaction data regarding credit and debit cards, deposit accounts, and transaction accounts. By July 1, 2021, data on mortgage accounts, overdrafts, personal loans, business finance, leases, and asset finance will be made accessible.
Japan, Hong Kong, South Korea, Bahrain, and Brazil are chasing closely behind as “followers,” while among the mid-field “converts” are Mexico, Singapore, Malaysia, Canada, and Thailand, the report says.
In Hong Kong, the monetary authority released last year a report on open APIs, a first step for development of the open banking ecosystem. In Japan, several amendments to the Japanese Banking Law were made in 2017, requiring banks to create APIs to collaborate with fintechs within the next two years. It’s predicted that by 2020, 110 Japanese banks will embrace open APIs.
Meanwhile, Switzerland, India, Indonesia and China are considered “risers,” having initiated several moves though adoption remains limited.
Finally, at the earliest stage of development are the “beginners,” which include the US, New Zealand, Chile, Nigeria, Kenya, and Rwanda, the report says. Though some of these markets may seem well established, technically advanced and highly competitive, the absence of any real momentum in terms of open banking regulatory frameworks or common standards means they still have a long way to go.
Open banking: a global trend
Despite the heterogeneity in adoption, the report says that open banking is a trend that has taken the global banking sector by storm.
Today, banks from all over the world are implementing open banking.
According to Oliver Dlugosch, CEO and co-founder, Ndgit, a German company providing an API platform for banking and insurance, more than 50 countries now have some form of open APIs in place, combining more than 10,000 banks. 87% of all countries now have some form of open API activity, making open banking a truly global phenomenon.
In the UK, Lloyds Banking Group has implemented open banking as an Account Servicing Payment Services Provider (ASPSP), and as an Account Information Service Provider (AISP). As an ASPSP, Lloyds is collaborating closely with fintechs looking to use open banking, and as an AISP, the bank now have customers viewing their accounts from various providers on its mobile banking app.
Spanish banking group BBVA launched BBVA API Market in 2015, which currently has 12 open APIs available in Spain and three in Mexico, and Standard Chartered launched its open banking developer portal in 2017.
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