Kanika Hope_Temenos

Fast Forward Banking Digitalisation with Open APIs

Estimated reading time: 4 minutes

Temenos’ Chief Strategy Officer Kanika Hope has a chat about open banking with Enterprise IT News

EITN: Open banking is an idea and regulation that exists mostly in EU. Do you see this part of the world, APAC, and especially SEA, being able to implement open banking?

Kanika: While the EU and the UK are pioneers in driving open banking through legislation with the Revised Payments Services Directive (PSD2) and the Competition & Markets Authority’s Open Banking initiative respectively, countries around the world are learning from these approaches to implement open banking in different ways.

In Asia-Pacific, Australia is a notable example of advanced open banking combined with the Consumer Data Right. Hong Kong, Singapore and South Korea are also following regulatory approaches while China and India are more market-led like the US.

In China, in particular, platforms giants like Alipay and WeChat Pay have effectively implemented open banking in a favourable regulatory climate. They have exploited their huge social media and gaming platforms and customer bases to provide payments as well as AI-driven lending, wealth products and more. Consumers in Asia are broadly willing to share their data which will help open banking to gain momentum.

They have exploited their huge social media and gaming platforms and customer bases to provide payments as well as AI-driven lending, wealth products and more.

EITN: Are we in agreement that open banking means opening up of bank APIs for third-party players to access bank data and be able to develop apps?

Kanika: Open banking allows third-party providers to access the financial information of banking customers through Application Programming Interfaces (APIs).

The aim is to foster more competition in the banking industry so as to benefit the end-customer, whether a consumer or a corporate.

It also allows third party developers to use these APIs to develop apps, be they providers of banking services or technology companies.

The aim is to foster more competition in the banking industry so as to benefit the end-customer, whether a consumer or a corporate.

EITN: Has COVID-19 make banks in APAC and SEA more receptive towards open banking?

Kanika: Covid-19 hit the fast forward button on many digitalization trends that were already in place before the pandemic. The lockdowns imposed by the pandemic in particular proved a powerful booster for digital experiences and customer journeys enabled by open banking and the fintech ecosystem.

In fact, a recent Economist Intelligence Unit report for Temenos found that open bank hub initiatives, giving customers the option to connect their bank data with third-party providers, are the second most chosen innovation strategy globally. This was cited by 30% percent of respondents globally – a figure rising to 42% in Asia.

EITN: What are some of the steps/initiatives you see banks taking, in order to approach disruption from non-finance players and/or become a super app platform player?

Kanika: Shifts in customer behaviour brought about by the pandemic and increasing competition from big tech and new market entrants are causing established banks to rethink their business models. Many now aspire to develop digital ecosystems that bring more human, differentiated experiences to their customers. In this years’ global banking report from The Economist Intelligence Unit report and Temenos, 80% of respondents saw the platformization of banking services as a key trend by 2025 and 47% were committed to transforming their businesses into digital ecosystems  with the bank at the center of the customer experience.

Many now aspire to develop digital ecosystems that bring more human, differentiated experiences to their customers.

Banks increasingly understand that investment in technology is an enabler for new business models and critical for competitive differentiation. The same report highlights how 65% of global banking executives view new technologies such as cloud, AI, and APIs as the trend that will have the biggest impact on the sector over the next four years, with 81% think unlocking value from AI will be the differentiator between winning and losing banks.