�The Heart of Revolution�: �Open Banking� Brings Financial Empowerment to Society

Lead: The concept of “Open Banking” originates in
the U.K., along with similar concepts such as borderless banking and Open
Platform Banking. Open Banking, through the merging of third-party data,
algorithms, businesses and work-flow processes, succeeds in transforming into a
business-driven application structure, and upgrading the entire system from
front- to- back- office to be resigned to banking platform with that of
third-party vendors. It is driven by customers’ needs, making use of
technologies like API/SDK as the means, and eco-system scenarios as the basis
of application to provide customised services and achieve data commercialisation.

HONG KONG, CHINA�- Media OutReach - 30 July 2019
– As innovation of financial technologies and transformation of banking
operations continue to gather pace since 2018, the time is ripe for “Bank 3.0”,
meaning digitised, smart and open. Some article claimed that 2018
was the first year of Open Banking era, and assumed that Open Banking would
fundamentally alter the business, marketing, risk control and operation models
of commercial banks, to extend their service boundaries, and ultimately change
their growing curves. The banking industry would take this opportunity to
undergo a revolution.

In July 2018, a IDC survey of 146 Asia-Pacific
banks showed that 7/10 banks see Open Banking increasing their customer reach, and
4/10 of these see alternate direct/ indirect revenue streams in Open Banking.
In view of less than 10% of banks today can claim to be “innovators”, it has
the potential to level the playing field among banks. The survey estimated that
majority of banks are expected to ramp up their capabilities in terms of Open
Banking between 2018 and 2020.

As Open
Banking is gradually becoming a norm globally, majority of retail banks express
the willingness to ’embrace’ it. More and more positive attitude is attributed
to the situations of different markets throughout the world, in which
represented by the UK and the EU that the
banks are more specifically to satisfy regulatory requirements, whereas in
which represented by South East Asia and China, most of those are initiated by financial-technology
innovation and driven by the market itself.

So,
what exactly is “Open Banking”?

The
concept of “Open Banking” originates in the U.K., along with similar concepts
such as borderless banking and Open Platform Banking. Open
Banking,
through the merging of third-party data, algorithms, businesses and work-flow
processes, succeeds in transforming into a business-driven application
structure, and upgrading the entire system from front- to- back- office to be
resigned to banking platform with that of third-party vendors. It is driven by
customers’ needs, making use of technologies like API/SDK as the means, and
eco-system scenarios as the basis of application to provide customised services
and achieve data commercialisation.

Opportunities for accelerating Open Banking in Hong
Kong and Taiwan

There is a mode for the Open Banking
development. In
the U.K., Open Banking is a trend or concept that arises from regulatory needs.
To put
it another way, the regulators proactively issue guidelines or decrees to oblige traditional banks and
financial institutions to share customer information for free or for a fee. In
Hong Kong and Taiwan, Open Banking is also driven by laws or regulations.

In Hong Kong, “Open Banking” is raging. At this moment, Hong Kong’s
regulators are employing a wait-and-see approach with the hope that it will
allow both players in private and public sector to form a rhythm and work out
any potential hurdles before the Open Banking wave crests.

In
July 2018, Hong Kong Monetary Authority issued a revised API framework for Open
Banking. The framework would be implemented in four phases and was aimed at
encouraging provision of innovative, general services to enhance customer
experience using technology. As at the end of January 2019, the first phase
involving publication of banking retail product information including that on
credit loans, credit cards and wealth management, was completed. Phase Two
involving account-opening
using third-party service providers’ apps would be implemented by the end of
October this year.  The third phase
involves accessing customer account information and the fourth phase involves
making payment and transfers transactions. The time frame for the last two phases
would depend on the progress of the previous two phases.

Financial
Supervisory Commission (FSC) in Taiwan has adopted Hong Kong’s mode, which is promoted by banks and third-party service providers(TSP). Open Banking
is to be achieved through three stages. The first stage of openness aims at the banks’
commodity information, such as credit card, fund, mortgage interest rate and
other public information. The second one is to open customers’ information by obtaining their authorisation.
Meanwhile, TSP can
provide account integration services. And the last but not the least one is to open information
for trade.

The FSC instructs local Bank Association to study the scope and self-regulation of cooperation with
TSP and the financial institutions are responsible for formulating common API standards, including technology and information security standards. The Global Research & Industry
Alliance under National Chengchi University is responsible for reviewing
financial institutions’ files in the aspects of technology and information
security. It also acts as a platform for Open API verification and testing, and
consolidates the views of TSPs for reference.

Open
Banking: The flip side of the coin is risk released

In China, the term “Open Banking” is relatively a new concept,
but that is not to say there is no practice or case study of rendering services
and businesses in an open way. As early as 2012, Bank of China had proposed a
concept of establishing open platform. In 2013, it announced its open platform,
making a host of applications available, such as mobile payment, investment and
wealth management, credit card management, account management and cross-border
financial services as well as more than 1,600 interfaces. Subsequently, the
major banks began to explore the ways, through opening up API, to achieve
connections between financial services and user scenarios. By continuous
effort, the banks attempted to offer better customer experience in the context
of weakening collaborations between banks and current financial technologies.

The financial innovation of Open
Banking in China is remarkable and successful even when viewed globally. But the flip side
of the coin is, the greater the opportunity, the higher the risk.

In other words, the risk mainly
focuses on its openness. Partners provide scenarios for collaboration, but
there is little output about the core capability for risk control. Banks should
consider and be well-prepared of whether they could response to the risks about
input, resonance effect, and unpredictable matters, and build
sustained-releases and isolating mechanisms.

In addition, as Open Banking in
China is still in its infancy, there are many risks and hazards, such as different standards and norms, lack of mechanism
for access, weak data security protection, and malicious calls in the
interface. In the future, in order to solve the problems above, calls
for international collaborations in terms of regulatory supervision for establishing
unified technologies, data standards and norms, as well as the data-security
protection and internal control mechanism are essential and critical.

Experian
secures the implementation of Open
Banking during the critical juncture of
banking Innovation

China’s Open Banking process is experiencing a
critical transition. Professional partners as well as
advanced and mature
mechanism may
help to form a stable transition. Thus, Experian — with long term commitment to
providing sophisticated decision-making systems and analytical services for
financial institutions — has a sound and fruitful experience.

Experian Greater China has become
a strategic partner for providing Business Credit Services, Decisioning &
Analytics, Identity & anti-Fraud Solutions, Data
Quality and
Audience Targeting
services. The
company has established strategic partnerships with many well-known financial institutions in China, including China
UnionPay as well as top ten banks in China, Shenzhourong, JD Finance and
Sunshine Insurance. Provision of services to banks are our core business in
China.

As the concept of Open Banking
began to draw attention last year, competitions among major traditional banks in China get into a white-hot stage.
Experian’s explorations
in the reform of Open Banking initiatives in Europe and the United
States have enabled it to form
effective solutions, and hence to provide foreseeable insights and professional services to Open Banking
endeavors from four dimensions, namely, strategy, data, insights and
implementation. Through
those exercises, Experian enabled traditional banks to aid the Open Banking in a safe
and timely way.

Take the affordability
test operations in the U.K.
for
example. A customer
allows Experian to
access
his/her
account information
which can
then be verified using existing information in the possession of Experian and
statements provided by PSD2. All relevant information is then combined on
Verdus platform, which
is actively accumulating and managing the data exchanged between the creditor
and banks, constantly monitoring the income and outstanding debts, in order to estimate the customer’s monthly disposable
income and his/her affordability. Proper recommendation
of credit loan
product is recommended and the needs of
an enhanced loan application and user experience can be met upon customer’s
request.

Strategy consulting: during the transition period from
traditional ways to Open Banking operations, banks have to make strategic
choice in the face of market competition or regulatory demands, based on their
own market positioning and risk aversion. They are forced to consider whether
to actively build personalised services in order to acquire customers or capture
market share or adopt a wait-and-see attitude. In this regard, Experian’s extensive
experience in strategy management for retail banking as well as its deep
understanding of the Chinese market garnered over decades of operations, as
well as an experienced and professional team in the banking industry and Open
Banking, will enable it to help banks analyse their existing situation and
formulate appropriate Open Banking strategy along with specific implementation
methods.

At
the core of Open Banking is its data. To be truly ‘open’, data must be freely accessible, and financial
institutions have to consolidate internal data and output them for application
in conjunction with external data. Experian possesses unparalleled advantage in
the area of data analysis. It is not only offering data integration services by
its experienced team but providing sophisticated data integration products to
carry out automatic integration and construction of wide range of data. An
example is Experian’s CrossCore in anti-fraud field, which can actively incorporate
diversified data in a precise and effective way.

Insights: Voluminous
data are analysed using new technology in order to obtain unprecedented insights.
To achieve real-time effect data analysis and reaction, institutions would need
to rely on Experian’s breakthrough in technological application and real-time
connection technology. Indeed, the process of translating information into insights has always been
Experian Consulting’s strength. Experian has assiduously made long-term
investments in new technologies and applications, one of which is its
innovative laboratory X-Lab,
which constantly develops products, technologies and applications that meet
customers’ needs. In addition, Experian strengthens and upgrades traditional
risk assessment models using new information from Open Banking, to build a more powerful
risk assessment model platform. The platform enables Experian to help formulate
innovative strategies for Open Banking, as well as forecast better services or
products — such as a
credit
card or credit loan products — for customers befitting their current status.

Implementation: Implementation
calls for combining strategies, information and insights, connecting all the
dots in the customer’s system environment. For this, Experian’s product
portfolio covers basically
all aspects of risk management, including information integration platform, fraud
detection and through credit risk management. As far as the customer is concerned, basically Experian
is capable of meeting all needs throughout the whole life cycle.

Experian
builds new service eco-system for Open Banking through Fintech

Fundamentally what drive the
changes in Open Banking are new, evolving banking technologies and customers’
consumption preferences.

Open Banking is truly focused on
customers’ core concerns. For the customer, there is greater freedom to compare
and seamlessly switch financial service providers. The customer’s financial
status is considered as a whole. As there is no need to deal with multiple
accounts, his needs for financial services such as account processing can also
be met in a highly-efficient manner, thereby allowing him to switch accounts as
will.

At present there are numerous
platforms with advanced financial technologies including Internet-based fraud
detection, Internet-based payment integration, Internet-based wealth
management, artificial intelligence and blockchain SaaS platform. However,
since the financial technologies only handle general applications, to apply
them to specific scenarios would require considerable configuration, which may
be too much effort for small and medium banks.

Through assiduous development of
innovative products and services in keeping with the pace of technological
advancement, Experian has been able to participate in and even take leadership
in linking traditional closed system of banks with the Internet eco-system,
thereby creating a new frontier for banks. Banks and customers are connected in
a new manner such that in the Internet eco-system, banks will have the opportunity to come into
direct contact with customers, helping them to deeply understand relevant
customer data with the ultimate goals of having precise understanding and
insight into customers’ true and even potential needs.

With this the service nature of Open
Banking can truly be showcased, not least because of Experian’s support for
such technology. Banking is the product of socio-economic eco-system and the
growth of banking and finance industry will prove essential for the
eco-system’s prosperity and growth.