It is a fact that Open Banking is slowly blooming worldwide, leaving traditional banking behind like a dear memory. But not all that glitters is gold, and countries are struggling to keep up with expectations. So, what is the actual worldwide adoption? Let’s see together in detail where we stand.
In North America the situation is warming up and US and Canada are trying to respond to European’s PSD2 with their own regulations, though in different ways.
Canadian government has completed a consultation in February 2019 and invited all FinTechs to give them advice about benefits and risks of open banking and has then set up a final deadline for all banks to be aligned: end of 2021.
In the US the situation is moving slower. In July 2018, the Treasury released a report advising the Bureau of Consumer Financial Protection to let TPPs access financial accounts and transaction data, and the NACHA Electronic Payment Association is going to launch 16 APIs. Unlike Canada, US did not set up a deadline and initiative is left to private banks.
Central and South America lag way behind. The only countries which are moving into the right direction are Mexico and Brazil. Mexico has already set up a first draft of regulation and the Chamber of Deputies has already approved a FinTech Law. The only thing missing is a final deadline. Brazil has announced that a legislation on Open Banking shall be introduced in mid-2019, and a final deadline will be decided afterwards.
In Asia many countries are currently legislating or thinking about doing so. Countries that have a regulation on Open Banking at the moment are: Malaysia (since 2018), Hong Kong (since 2018) and the first-mover Singapore. After the creation of an Open Banking environment in 2016, Singapore has been one of the first countries to legislate in Asia with the “Finance-as-a-Service Playbook” and the Financial Industry API Registry. South Korea, Japan and People’s Republic of China do not have a regulation yet.
Japan and RPC are evaluating the possibility of Open Banking and in the meanwhile are leaving the “hard work” to private banks: Japanese government is aiming to have 80 banks adopt API by 2020. On the other hand, South Korea is still blocked without regulation since 2016, when the Fintech Open Platform was launched.
Oceania has a rapidly evolving situation: Australia has already set up two main key regulators and July 2019 is the final deadline for the 4 biggest banks, and the starting point for all others, while New Zealand has started an Open Banking Pilot in 2019, but still does not have regulation yet.
The European Union has already created its regulation, PSD2 (Payment Standard Directive 2), which is now effective in each member’s law. 2 main deadlines have been set up: March 14th of 2019, asking banks to have a testing sandbox set up, including APIs, documentation and technical support for external developers, and September 14th 2019, which is the final deadline for PDS2 compliance. Regulation is already effective in the UK as well, and government has stated that the 9 largest private banks in UK must form an Open Banking Implementation Entity to provide standardized APIs.
UK and EU share common goals regarding PSD2: foster competition, create a common European card and an online payment scheme.
Even though regulation is fully completed, a recent article by Finextra highlights over 40% of European banks did not open their sandbox by March 14th. A compliance above 80% could be only found in Germany, Belgium, Finland and Sweden, a compliance over 60% could be found in the Netherlands and in UK. Spain, Denmark, France and Norway lag behind with under 50% of the banks apparently being compliant.
Italy is one of the countries where compliancy has apparently not been met across all banks, and 4 different approaches have emerged in the market: banks which are developing APIs internally, banks which have an external provider, banks which belong to international groups and are developing APIs internally and banks which have an outsourced IT which develops APIs.
As the situation worldwide is expected to evolve very fast, and as – like or not – all European banks need to be compliant, or prepare to be, for regions in the process of enrolling a full open banking, banks need to act fast if they don’t want to lose credibility and be disintermediated.
If you feel you are slowed down in open banking or not compliant, and you want to rapidly get to speed, at Epiphany we are happy to help.
Contact us here