What does Open Banking look like around the World?

The Consumer Data Right and its host of benefits for businesses and consumers have not only been realised in Australia - at the latest count, Open Banking has already taken hold in more than 60 markets across the world. The services and products on offer are different from country to country, depending on industry objectives and whether initiatives are regulatory-driven or market-led.

In this blog post, we take a look at what Open Banking looks like across the globe.

How it all started: Open Banking in the EU

Some may say that Europe was the ‘pioneer’ of Open Banking - after all, it introduced the Payment Services Directive 2015/2366 (PSD2) in 2018, a regulatory directive which mandated that banks share data through application programming interfaces (APIs) that allow for data to be exchanged. The PSD2 laid the groundwork for Open Banking to be rolled out across the EU. Since the inception of the PSD2, a number of Fintechs have teamed up with major businesses and banks to offer Open Banking services and products to consumers.

By the middle of 2021, 497 third-party providers were registered to provide open banking services in Europe - and this is not including the regulated banks. This year, we expect to see a wide range of businesses partner up with Fintechs, as the CDR expands across multiple industries in Australia, such as the energy and telecommunications sector.

What’s the state of play of Open Banking in Asia?

A number of countries in Asia, such as Japan, Singapore and South Korea, do not currently have formal or compulsory Open Banking regimes, their policy makers have introduced a range of initiatives and practices to promote and accelerate the uptake of data sharing frameworks in banking. In Asia, the campaign to adopt Open Banking is largely market-driven. Japan was among the first Asian countries to establish its own Open Banking framework - perhaps unsurprisingly, as Japan is seen as a hub of innovation and tech. In Japan, the Financial Services Authority has established an authorisation process for third party service providers, introduced an obligation for banks to publish their Open APIs policies, and encouraged banks to contract with at least one TPP by 2020

Unlike in Australia, there is no mandatory requirement for banks to share data. Instead, in Japan, open banking arrangements are sorted between banks and third parties as they each see fit. The major Open Banking providers in Japan include MoneyForward (a personal financial management service), Zaim (a bookkeeping app), MoneyTree (a personal financial management service), and Nest Egg (automated personal savings software).

Whereas on 5 July 2021, the New Zealand Government decided to implement a new legislative framework for the CDR. It is expected that a Bill implementing CDR will be introduced to Parliament in 2022 focusing on developing rules and standards, and measures for enforcing the CDR.

What’s the approach to Open Banking in the United States?

In the US, Open Banking has existed in some form or another for quite some time.

The US has opted for a market-led approach, without any significant government initiatives to support the development of Open Banking products and services. Although a number of major US banks have embraced Open Banking by contracting with third parties as a way to attract new customers and gain a competitive advantage in the financial services market, the US’ market-led approach has been described as largely bureaucratic. The market players wrote the rules, but this led to inconsistency in how data was shared.

In the absence of an industry-wide API strategy, banks continue to use screen scraping to fetch consumers’ data as a way for third party providers to provide innovative services to customers without having to enter into a contractual arrangement with each bank.

Now, the Financial Data Exchange - a cross-section of banks, fintechs and financial services groups -- has aligned around a single data-sharing standard and is supporting the adoption of open-banking frameworks across the country.

Canada’s government has wholeheartedly embraced the advent of Open Banking. While Open Banking is still at its inception in Canada, the Canadian government has released its blueprint for Open Banking, with an advisory committee published its final report on Open Banking, which detail what Open Banking should look like in Canada, what data should be included in Canada’s Open Banking system. Canada’s government has paved the way for an open banking regime in the country by the beginning of 2023.

It’s clear that while open banking initiatives are popping up all around the globe, jurisdictions are adopting their own approaches to Open Banking to accommodate for their own markets and policy objectives. Countries across the world recognise that Open Banking presents a host of advantages and opportunities for businesses to expand the products and services that they can offer to their customers.

To find out how Fiskil can help your business get started in harnessing the advantages of the CDR, get in touch.