SEA warms up to open banking slowly but surely

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It’s easy to take modern-day conveniences for granted.

Students going to school overseas used to have to bring stacks of cash with them; now, they can use remittance apps for cross-border money transfers.

Signing up for a bank account used to involve form-filling and had to be done in person; these days, a customer in Singapore barely has to key in any personal data as it can be automatically pulled from a central database called SGFindex that leverages SingPass, the city-state’s national identity system.

Few can explain what “open banking” entails but many of us have experienced it at some point. Being able to top up an e-wallet using funds in your bank account instead of having to do so with a credit card, for instance, is possible because of APIs that integrate the e-wallet’s and bank’s respective software.

Southeast Asia continues to lag behind the West in open banking in terms of regulation, digital infrastructure, and awareness. But that is slowly changing, with countries like the Philippines starting to introduce frameworks to the space. I explain the merits of open banking, why big banks have reason to resist such changes, and more in this week’s Hot Take.

— Melissa

THE HOT TAKE

Unlocking the gates to open banking

Image credit: Timmy Loen

When open banking regulations came into effect in the UK in 2018, it opened the floodgates to a range of new financial services. Years later, Southeast Asia is catching up.

Last week, the Bangko Sentral ng Pilipinas (BSP), the Philippines’ central bank, invited BSP-supervised financial institutions and third-party providers to participate in a standards consultation for the Philippine Open Finance pilot.

With the pilot, which will explore the use of APIs in the delivery of financial products and services that are responsive to customer needs, the Philippines joins countries like Singapore and Indonesia, which have launched their own frameworks to encourage the adoption of open banking.

While that’s a step in the right direction, it seems the region has a long way to go.

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