Open Banking (OB) has been revolutionising credit risk profiling and aiding personalised financial planning around the globe, all through the customer-permissioned release of banking data. This has been allowing accelerated innovation by shortening the time products can be created and making new markets accessible.
As Open Data expands in different parts of the world- from its banking origin, through to include wider financial products, into telecommunications, energy and health- the prospects for innovation and financial inclusion are vast.
Since the UK embarked on OB six years ago, other OB frameworks have been set in motion in different countries, with their own regulations and API technical standards. Across the globe regulators are looking at OB and moving towards Open Finance and Open Data regimes, unleashing financial innovation in their wake.
To encourage innovation in Fintech Smart Data Foundry has been building a digital library of OB standards, including details on their API scopes as well as their regulatory environment. This is integrated into a global innovation atlas, allowing exploration of vastly varying different financial ecosystems and the OB standards existing within them.
We’ve been in conversation with those closely involved with setting up, implementing, and using such technical standards around the world, and asking them what lessons they’ve learned over these fast-paced years.
“Customer experience (CX) is critically important and needs to be accommodated in the regime from the beginning,” says James Bligh from the Australian Consumer Data Standard (CDS). The Australian Consumer Data Right (CDR) was introduced in the banking sector in July 2020 and will expand to finance before being rolled out across other sectors of the economy, starting with energy and then telecommunications. Australia took an Open Data approach from the start to give consumers greater choice and control over the data businesses hold on them. James admits that the customer experience was initially overlooked in lieu of the technical aspect of delivering APIs, although they’ve subsequently been added.
Brazil launched its OB journey in 2021 before moving to Open Finance. Luana Soratto from the Brazilian Fintech Association, ABFintechs (Associação Brasileira de Fintechs), agrees on prioritising CX,
“If the journey’s interactions aren’t clear and highly simplified, the customer can give up and not use Open Finance again”.
Customer experience requirements to be implemented as a minimum feature prominently in the operational guidelines for open banking in Nigeria, published in March this year, implying this lesson is being learned by new participants to OB.
Of course, countries’ financial services are built within different environments. India embarked upon a digital transformation of its banking system with the formation of India Stack. This comprises a tier of services, including digital identity, a digital payments system, and an Account Aggregator framework, with an eye looking forward to customers being able to leverage their data for use in telemedicine and e-commerce. The India Stack environment is built as a hybrid between the government and the markets, and Vasmi Madhav from Sahamati in India (a non-for-profit behind the India’s Account Aggregator) talks of “a consensus-driven mechanism amongst institutions, facilitated by the regulator’s technical department (that) has been used to bring together convergence on this.”
For Brazil, the complexity of their standards led to an increase of technical groups from seven to twenty-six. Luana Soratto reflects that giving everyone a voice “takes a lot of work and time, but we understand that it is the most democratic way possible.” For James Bligh from CDS in Australia, the use of open source and GitHub has made sense.
“As a result of this process, we have a great deal of engagement in our consultations.”
The UK’s experience in being an OB pioneer is being utilised by players newer to the field, such as Canada, who is looking to phase in OB this year. Fiona Hamilton, Head of Standards at the OBIE, says “We have a regular ongoing dialogue with Abraham Tachjian, Canada’s OB Lead, in which we have shared views. He has been particularly interested in the recent Joint Regulatory Oversight Committee (JROC) developments aimed at extending OB beyond the order.” Canada perhaps recognises that the OB ecosystem is swiftly moving on in the trajectory of Open Data. FDX in the US has been working to adapt its standard to suit the Canadian market, an ecosystem dominated by five banks. How will that be managed? Jason Chomik, the Canadian Director for FDX says to be inclusive “Any member can submit a Request for Change to the working groups for consideration. Any votes of significance require a two-thirds super majority; anything material must have consensus.”
Perhaps controversially, Australia has decided that working with a majority isn’t as effective as having a ‘decider’. “One of the best things about our system is that Andrew Stevens, the Data Standards Chair, has the final word on the contents of the standards. There are requirements for him to consult, but he does not need approval from a committee of any sort. Technical standards are often contentious, and the best position is often the option that everyone hates”.
Australia set out from the off with its regulatory standards to work in an Open Data world, yet Sheri-Lee from New Zealand’s API centre cautions that regulation can become burdensome and stifle uptake. They hope that New Zealand’s “light touch approach” allows for faster innovation yet are very aware that a lack of regulation then means there are “very limited tools we have to enforce the uptake of standards”.
It appears it is a juggling act of regulation, flexibility, innovation, and enforceability that all standard bodies must manage in the rapidly evolving world of Open Data.
Smart Data Foundry’s Standards for Innovation will be hosting a rich source of material about the worldwide state of financial openness and financial inclusion, in addition to a library of Open Banking standards. It’s a useful comparison tool and offers a practical guide to the unique attributes of technical standards around the globe.
As Fintech look to innovate and additional countries regulate to extend the reach of Open Data, we feel that shining a light on the different approaches as well as common features is crucial to encourage more dialogue and cooperation between standard bodies and pushing the world forward into opening data for good.