There is no «one-size-fits-all» approach to open banking, but if implemented well, it will modernize the payments ecosystem and deliver great benefits to consumers, according to a report by the Emerging Payments Association Asia.

Companies such as Fintechs and Payment Technology Companies (Paytechs) are moving into this new market poised to provide innovative services to customers, according to the association's research report on Open Banking in APAC which outlines challenges, opportunities and recommended approaches for Asia-Pacific’s financial sector. Regulators and stakeholders can collaborate to tailor approaches that are appropriate to the local context, but this would involve continued diversity, experimentation, and adaptation.  

«The report notes that Open Banking, properly implemented, will modernize 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,» said John Ryan, Director General of Policy and Projects at Emerging Payments Association Asia (EPAA) in a media statement.

Key Focus Areas

«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,» said Brad Pragnell, one of the lead contributors to the report. 

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:

  • Open Banking is inherently multi-disciplinary and requires the coordination and leadership of regulators, central banks and government agencies.
  • Inclusive consultation and implementation processes that go beyond “big banks” to also include smaller institutions, new entrants and Fintechs.
  • Development of APIs with consideration of what has been done in other jurisdictions will be beneficial (for example, Australia leveraged the UK API standards).
  • Open Banking is more than a technology solution; it goes beyond the standards and rules around APIs.
  • Consideration of Faster Payment, Digital Identity and Consent Management initiatives will support the development of Open Banking.

Different Stages of Development

Given the diversity in Asia Pacific, the roadmap for Open Banking development varies. Singapore, Hong Kong and Australia have focused a 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 analyzed 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 Ryan.