[ET Net News Agency, 3 October 2019] Hong Kong is making slow progress on open banking.
The city will continue to lag some other major financial centers on the adoption of this
digital-banking niche, S&P Global Ratings said today in a report, titled "The Future Of
Banking: One Year On, Hong Kong's Open Banking Initiative Hits A Roadblock."
"Roadblocks for Hong Kong's opening banking initiative include a clunky mechanism for
approving third parties that can use bank-generated data to provide financial services,"
said S&P's credit analyst Fern Wang. "Data security is another key issue."
More than a year after the Hong Kong Monetary Authority (HKMA) announced a four-phase
initiative to develop open application programming interface (open API)--the open-banking
infrastructure--regulators are still deliberating the security features. The HKMA said
recently that it is working with industry participants to set standards by 2020 on more
advanced open-banking services.
Open banking holds the promise of providing a broader scope of services to customers by
building an ecosystem in the banking platform at a relatively low incremental cost to the
banks.
By enabling more touchpoints to meet the daily service needs of its customers, banks can
improve customer engagement and increase revenue streams. Customers are also going to
benefit from more tailored and broader ranges of services. Yet open banking could
intensify competition among banks due to a higher level of pricing transparency. It could
also expose banks to higher risks and costs on data security.
At the individual bank level, institutions that have experience with opening banking in
other regions could be first movers and find it easier to reap the benefits of such
platforms in Hong Kong.
Smaller banks that lack resources and experience may find it harder to adapt to these
changes and absorb the related costs. Over time, this could reduce the relevance of their
services to customers, resulting in lost revenues. (KL)