Market drivers: Technology, demand and competition
Open banking is likely to rapidly gain momentum, driven by a number of factors:
Data-centric technology advances
Digital transformation is disrupting the financial services industry, and data has proliferated and become more valuable. Advancements in API technology are making it easier and safer to share data.
Changes in market demand and customer expectations
The upsurge in mobile and social technologies means consumers are more powerful than ever. Their always-connected status and ability to find information in seconds puts them in control of their experience.
The changes in consumer behaviour contribute to the rise of new, more agile financial services providers, putting competitive pressure on incumbent banks. The regulators are also welcoming the competition.
Looking forward: The future of open banking in Asia
Open banking presents an opportunity for banks to reinvent themselves and find valuable roles in the new ecosystem. It will inevitably change the financial landscape, generating clear winners and clear losers.
Banks that thrive will be those that embrace open banking and modernize their business models, opening up to third parties and not relying on their incumbent status. Those that focus on simply harvesting or protecting their current business, on the other hand, are likely to face rapidly increasing erosion.
Diverse regulatory approaches to open banking
While the regulatory approaches and underlying policy objectives may vary by jurisdiction, the direction of travel is towards encouraging adoption of open banking. The report discusses the approaches of selected Asian jurisdictions, as compared to the UK, European Union and the U.S.
Mandatory jurisdictions: where open banking has been mandated by the regulator(s), including in phased deployments based on different categories of financial institutions, products or customers. These include European Union, United Kingdom, Australia, Hong Kong.
Supportive jurisdictions: where clear shifts towards open banking are occurring and regulators openly encourage, but do not mandate, open banking. These include Singapore, Japan, Malaysia, The United States, Taiwan, South Korea, India, New Zealand.
Neutral jurisdictions: where there have been little to no regulatory statements on open banking, but there has been some industry-led adoption and experimentation. These include China, Indonesia, Sri Lanka.
Open banking is poised to be the next wave of digital transformation in the financial sector. It has extra momentum because regulators around the world generally support it and, in some countries, even mandate it. In fact, one might say regulators are ahead of the industry in this regard in certain jurisdictions. Because of this, open banking is unlikely to be a short-lived trend.
Joy Fuyuno, Regional Snr Counsel, Digital Transformation & Privacy Asia
“The accelerating pace of technological change is possibly the most innovative and potentially most disruptive force in the financial services ecosystem today. Open banking looks to be the next wave, driven by regulatory support and customer behaviour.
We are delighted to partner with Microsoft and Accenture to consider the shared opportunity which open banking presents, and the clear need for digitisation and cultural change while remaining compliant with regulatory requirements.”