Money 20/20 Asia day two kicked off with a discussion on open banking and how regulatory mandates and open API guidelines are driving this initiative in this region. With Asia learning lessons from early adopters in Europe, panel sessions highlighted what the challenges are for banks and regulators.
Darren Thayre, APAC partner at Oliver Wyman, revealed that the collision of megatrends in society, behaviour and perceptions of data, has triggered disruption across industries and as a result, new players are launching core banking products when they would not have touched this industry in the past.
“No one wakes up in the morning and says that they want a better relationship with their bank, but people do want to know how to better prepare for the future, mitigate bad decisions they’ve made in the past and find out how to start saving,” Thayre said.
He went on to answer a question posed by an audience member who asked whether Asian regulators are looking to implement standards such as PSD2 in Europe. Thayre said, despite not having a crystal ball to look into the future, he would be surprised if no moves were being made in this space and advised financial institutions to prepare just in case. “The time it takes from acknowledgement to getting good at it is longer than you think.”
Gavin Littlejohn, chairman at FDATA, then took to the stage to dispel myths and said that it is shocking to see how so many in the financial services space do not fully understand what open banking is. “It’s not about APIs, it’s about consumer data rights.
Open finance is about sharing the data that you want to share. If it’s not about this, then it is a technology partnership, not open banking. If a bank is seeking a relationship with a fintech, that’s not open banking either.”
Littlejohn continued to say that in reality, it’s about the customer’s right to share data and while PSD2 allowed customers to share payment data, other data is still in an unregulated space and this information is not covered by any of the protections that PSD2 provides.
He also spoke about liability and how this differs in different regions: when banks transfer data to a third party, a fintech for example, due to different regulations in different countries, occasionally banks are still liable if something goes wrong. In the UK, the open banking initiative was developed in September 2016 but this only tackled payments data, not data regulation across the entire financial services scope.
Littlejohn advised the audience that while the UK has been put on a pedestal for pioneering open banking, “be aware that it has serious weaknesses in its architecture.” He went on to discuss developments in other countries and regions; Canada are introducing a new open banking capability, but discussions are still being had as to whether they will focus on payments data or the wider financial services space.
In the US, while movements are being made, the convoluted regulatory environment is somewhat hindering open banking initiatives from covering the entire financial sector – while in Mexico, the government is developing a plan similar to that in the UK.
Littlejohn also explored how the central bank in Brazil has given permission for a data rights plan but with a focus on improving financial inclusion and reducing barriers to access. In India, similarly, the Reserve Bank has implemented open banking initiatives in addition to data protection rights, and in 2019 will introduce a data protection authority.
He then set out seven points that should be considered when introducing an open finance framework:
1. Implement customer data rights
2. Ensure the customer can give and take away consent
3. Consider liability
4. Put in place a regulatory framework
5. Discuss technology specifications
6. Set up an implementation capability that considers governance and funding
7. Explore implementation journey and monitor success
Joining a panel session, Littlejohn stated that while the implementation journey in the UK was “rough” and maturity and resilience problems were encountered, he predicted this will stablise in the next few months.
‘Payments glitterati” Nilixa Devlukia then said that open banking “puts the customer at the heart of the financial decision and broadens the scope of who can get advice because it is now automated and lending, because of data analysis.”
Sairam Rangachari, executive director and head of open banking and API strategy, treasury services at J.P. Morgan added: “I just think it’s cool to empower the customer. It should be ‘outside in’ and we should fit into the customer’s lives, rather than making them do things they don’t want to.”
Littlejohn said that the growth in the UK has not been based on the customer being educated about what open banking is. “Third party providers have communicated the benefit of using open banking to customers. Open finance is the plumbing, but I’m not sure if the barrier to growth is customer education – they’re just waiting for great apps that solve problems in their lives.”