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Open Banking APIs in Asia need a set of common standards
THE rise of open banking and open application program interfaces (APIs) have profound implications for banks and financial institutions.
Open Banking is about banks coming together with other industry players to develop the digital services customers have come to expect, with regulators encouraging and ensuring a secure environment for all.
The Open Banking concept changes how banks deal with people's financial information, meaning if a person gives his/her permission the bank must then allow this data to be shared - this includes a record of how the person spends, lends, and borrows. The motivation behind Open Banking is to bring more transparency, competition and innovation to financial services which, in turn, should lead to better and fairer access to financial products and more services to help people manage their money.
Open APIs are the technology which enables this information to be securely shared. A way of viewing, and understanding open APIs is to look at them as the key to unlocking banking systems. Yet, due to the many different guidelines that exist for building apps and websites, you typically need a different 'key' for each service, each bank and for every market.
While Open Banking guidelines provide standards for both banks and third parties, they have tended to be less prescriptive when it comes to defining exactly what the APIs should look like and how they are written. Ultimately, the exact interpretation can vary from bank to bank and from market to market. A quick check on the Monetary Authority of Singapore's (MAS) API Register reveals a different API created by each bank, for even the most simple and common of banking transactions.
This means that, when looking to service banks across Asia, the fintech developers behind many of the apps and innovations which have made our lives easier need to create a different 'key' to support every different service, bank and market that they support. Clearly such an approach becomes rather unwieldy and counters the notion of fast innovation.
When it comes to Open Banking, Singapore is often touted as the front runner for this region. A recent International Data Corporation report puts Singapore at top spot for Open Banking readiness in the Asia-Pacific. Across the Asia-Pacific, other regulators are also turning their attention to Open Banking - with Hong Kong's monetary authority recently unveiling a regulatory framework to encourage open banking and Australia mandating its four major banks to introduce Open Banking by July 2019.
Although there are differences in approach from market to market, one thing remains consistent: a common, single set of standards could drastically ease the successful integration of open banking in Asia.
In the meantime, as more banks and fintechs adopt Open API specifications and experiment, it's promising to see commonalities starting to emerge. With Singapore's MAS encouraging Asean-wide experimentation around how this might look and work, a unified approach for every API developed by a fintech or financial services provider might not be too far away for the Asean region.
A more common, united and industry-led approach could help level the playing field and better help banks to quickly access innovation, integrating and deploying new apps from fintechs and developers into the services they offer consumers.
An open, agile, platform-based approach
A library of standard Open APIs, available to all banks and developers wanting to collaborate, could dramatically ease this process. Crucially this would mean that developers need only to develop their application once, with no requirement to create a unique version for each and every bank and their unique set of APIs.
For banks themselves, connectivity to a standard set of pre-built and fully integrated Open APIs is just one of the building blocks necessary to achieve success in today's fast-paced, digitally-driven reality.
Such a marketplace could also help enable developers to create, configure, test and deploy new apps to market faster than ever before.
Longer term there's also a need to extend the creation of Open APIs to beyond retail banking and payments to cover every area of finance - from corporate and transaction banking to lending, treasury and capital markets - enabling innovation in all areas.
In our view, a platform-based approach that leverages Open API standards has the potential to fundamentally change the way that software is developed, deployed and consumed in the world of finance and to deliver immense benefits to customers.
- The writer is Chief Marketing Officer at Finastra.