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Open banking regulations around the globe

Open banking is reshaping the financial landscape, offering unprecedented opportunities for innovation and customer service. But how does it differ around the world? This article explores the regulatory landscape of open banking, providing insights into how different regions approach this transformative concept.

In this article:
Open banking regulations in Europe

Open banking regulations in the UK

Open banking regulations in Asia

Open banking regulations in Australia

Open banking regulations in the US

Open banking regulations in Latin America

Open banking regulations in Europe

Europe is often seen as the pioneer of open banking, largely due to the Revised Payment Services Directive (PSD2). As of 2018, it mandates banks to share customer data with third-party providers (TPPs) upon customer consent.

The directive focuses on security and customer protection, ensuring that only authorised TPPs can access data. The list of requirements for providers includes among other things:

  • robust customer authentication mechanisms
  • transactions and device monitoring
  • standardised and secure application programming interfaces (API)

PSD2 aims to foster competition and innovation, leading to better financial products for consumers.

Open banking in the UK

The UK’s open banking journey began in 2017 with the establishment of the Payment Services Regulations (PSRs), which adopted the European PSD2 into British law.

In 2018 the Open Banking Implementation Entity (OBIE) was established to oversee the development and adoption of open banking standards. It offers guidance on API requirements and TTPs obligations and ensures that the latter get access to the user data.

In the same year, the government mandated the nine biggest banks, along with some other financial institutions, to share customer data with authorised TTPs using reliable APIs. This approach has created favourable conditions for the development of fintech and made the UK a hub for innovation in this area.

Open banking regulations in Asia

Asia has a diverse picture of open banking, with countries at various stages of implementation and regulation. Development here is often driven by the level of digital innovation and consumer demand for new services.

For example, Singapore and Hong Kong have adopted a more facilitative approach, encouraging banks to develop open APIs and collaborate with fintechs. The Monetary Authority of Singapore (MAS) is supporting open banking and has, to that end, introduced the collaborative platform called API Exchange (APIX).

Japan went further and in 2017 obliged 80 of its banks to co-operate with TTPs. This decision was formalised in the Banking Act amendments. In addition to encouraging the creation of open APIs, the document provided banks with opportunities to increase their stake in fintech companies and laid the groundwork for regulatory rules for providers.

Open banking regulations in Australia

Australia has taken a regulatory-conscious approach to implementing open banking, but the development has been much slower here than in other regions.

In 2017 the country implemented the Consumer Data Right (CDR). It enables users to grant authorised TTPs access to their personal data and focuses heavily on protecting the customers’ rights and data.

The next year Australia established the New Payments Platform (NPP) to enable nearly instant payments on a 24/7 basis.

Despite these steps, the rapid development of open banking in Australia has been slowed by both a lack of consumer awareness and problems with accreditation processes.

Open banking regulations in the US

The US does not have a unified regulatory framework for open banking like Europe or the UK. Instead, it follows a market-driven approach, where individual banks and fintechs negotiate access to data sharing.

However, it’s about to change. In October 2023, the Consumer Financial Protection Bureau (CFPB) released a proposal on Personal Financial Data Rights. This open banking rule would set the regulatory ground for sharing, using, and storing customer data. It is promised that the new standard will not overly restrict and control open banking services but instead will take into account the already existing situation and only help to create a unified system.

Open banking in Latin America

Latin America is rapidly embracing open banking, with countries like Brazil and Mexico leading the way.

A kind of pioneer of open banking in the region was Mexico, which passed its Fintech laws in 2018. This legislation formally recognises and regulates open banking by mandating financial institutions to open APIs for sharing data with third parties upon customer consent.

Brazil has opted for a fully regulated, step-by-step model of open banking implementation under the control of the Central Bank. The strategic deployment aims to gradually introduce open banking principles, ensure secure data sharing and develop a competitive yet collaborative financial ecosystem.

Open banking solution in Payop’s package

Regulatory approaches to open banking vary from region to region. However, regardless, they all stimulate the emergence of new technologies and services. One of the examples is Payop’s Pay-by-Bank solution. It allows customers to make payments directly from their bank accounts without entering sensitive data. The advantages of this method include better security, reduced cost and higher conversion rates. To find out more, contact our team at [email protected].

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