Other contributors from UOB included Federico Burgoni, Head of Group Strategy and Transformation; Fouad Roukoz, Executive Director, Group Strategy and Transformation; and, Aaron Chiew, Head of Mobile and Digital, Personal Financial Services.
Pat Patel, General Manager at Elevandi, sets the scene
While Open Banking feels like it’s been around for many years, its origins started with two important regulatory movements in Europe. The European Union’s Second Payment Services Directive (PSD2) and the UK’s Open Banking initiative, both of which rolled out in 2017-2018. Stimulating competition and enabling customer convenience, switching, and choice have been at the very heart of this movement.
One of the key challenges has always been and remains the commercial value propositions. While Europe has adopted a decentralised yet regulatory approach, many other countries, such as Singapore and India, have opted to build core national infrastructures. While it is difficult to judge which approach is better, unit economics is very important in the delivery of propositions as is the ability to connect to other industry data sources. This is where it gets interesting!
Open Banking, however, is at a key inflexion point, as partnership constructs increase both within and outside of financial services, usage is rising, and funding is rising even faster. While it does have the potential to change the industry, I believe it will be the intersection of industry data and technology that will drive forward new commercial models and customer value propositions.
At Elevandi, set up by the Monetary Authority of Singapore (MAS), we firmly believe that Web 3.0 will be the catalyst to drive the change that the industry needs. It is these transformational technologies that will remove friction and reimagine how we spend, save, borrow, lend, and invest money locally and across borders.
We will be covering all these areas and more at the Singapore FinTech Festival 2021. Examining how the world’s banks, fintechs, and others are looking to design and build for Web 3.0. And it will be fascinating to see some of the new decentralised companies and protocols come together.
We look forward to welcoming everyone at SFF on 8th November 2021 for a five-day celebration of everything fintech.
Open Banking
Here we ask two leading industry figures about the current state of Open Banking in Singapore and how it might develop in the future.
What is the current landscape of Open Banking in Singapore? What are the areas where you have seen the most progress being made?
Todd D. Schweitzer: Overall, it's still early days for Singapore when it comes to Open Banking policy, implementation, and industry adoption. MAS has made a lot of progress articulating standards and technical guidelines for participants, encouraging a bottom-up, industry-led model rather than a UK-style industry mandate.
We have seen the most encouraging progress in the areas of Singpass as a unified auth/consent/ID mechanism; Singapore Financial Data Exchange (SGFinDex) as the first step toward shareable Open Data; and payments interoperability with other countries like Thailand’s PromptPay and the recently announced partnership with India.
What lessons can other markets and regulators take from Singapore’s success in Open Banking?
Janet Young: In Singapore, the MAS takes a phased and consultative approach with the industry to drive Open Banking for the benefit of customers.
The success of public-private cooperation in Open Banking is driven by several factors: a common agenda around financial freedom for Singaporeans, clear accountability (such as that the participating organisation or the Government or individual(s) will be held responsible if it is determined to have caused a data breach, had disclosed data without an authorisation or misused data for gains), and transparency in how ecosystem partners collaboratively design and monitor the digital infrastructure.
For example, SGFinDex was created to make it more convenient and efficient for customers to plan their finances holistically. As such, all participants of SGFinDex have agreed that the data shared must only be used for financial planning.
The ability and ease of accessing and tapping advanced public services and technology (e.g. the Government’s secure national digital identity system Singpass for authentication, API sandbox) also enable partners within an ecosystem to share data in a secured manner.
Todd: I would say the MAS-led initiatives to encourage industry adoption such as the API (application programming interfaces) playbook released in 2016. This set out a comprehensive framework that introduced governance, implementation, use cases, and design principles for APIs, together with a list of over 400 recommended APIs and 5,600 processes for their development. I would reference the API Register, a single database of all Open Banking APIs and APIX, an API marketplace and product development platform.
So, what are the main lessons?
Firstly, in a market with highly competitive banks, Open Banking is seen as a growth driver and path for new products. Secondly, regulators don’t necessarily need to require Open Banking adoption as long as banks see the commercial benefits.
Thirdly, the Open Banking approach to payments has helped open up Singapore to other markets like Thailand and India. Lastly, due to Singapore's efficient Singpass online ID, now Singapore’s national ID can be used to create bank accounts, apply for credit cards and loans in real-time.
What are the key Open Banking use cases in Singapore? And where do you see the major use cases going forward?
Janet: Singapore is making progress in the Open Banking space and underpinning this is a unique hybrid model that brings together government agencies (led by the MAS and private financial institutions such as UOB).
One of the recent initiatives is the launch of the Singapore Financial Data Exchange (SGFinDex) in November 2020, the first public-private Open Banking collaboration in the world to enable individuals to have a comprehensive view of their financial information so that they can plan their finances holistically.
Using data aggregation (product holdings), individuals can retrieve their personal financial information (e.g. deposits, credit cards, loans, and investments) from participating banks and other financial information (e.g. HDB loans and CPF balances) from relevant government agencies.
The subsequent phases of SGFinDex which are in progress will enable more industry players to be part of the ecosystem which will enable consumers to see in a single view other types of data such as their investment and insurance portfolios.
The Singapore Trade Data Exchange (SGTraDex) is another Open Banking initiative launched in 2021 to facilitate trusted and secure sharing of data between supply chain ecosystem partners (e.g. shippers, asset operators, service providers, and the government) through a secure platform.
This data infrastructure is designed to be like a highway that has fast lanes for data flow and slip roads for data to prepare to enter or exit the infrastructure.
By connecting local supply chains to existing systems and global supply chains, SGTraDex enables shippers, logistics providers, trade financiers, and other intermediaries to share data effortlessly and securely.
Todd: Using Singpass for OCBC KYC/Authentication. As for where it's going, I would say it's the fact that bank apps now allow you to aggregate your bank account data from other FIs so you can track your personal finances in one place. It also gives you easier/faster access to credit.
Secondly, and this relates to now and the future, we’ll see easier ways to send and receive funds internationally, even by simply scanning a QR code. Thirdly, in the future, we’ll see smoother integration between banking the crypto economy, especially crypto exchanges and decentralised finance (DeFi) products.
What’s UOB’s strategy for creating a competitive advantage through Open Banking and Open Finance? How is UOB putting Open Banking into practice? What APIs do you use to connect with your partners?
Janet: At UOB, we are always focused on making it simpler, smarter, and safer for our customers to achieve their financial goals through our progressive banking solutions, technological innovations, and ecosystem partnerships.
The launch of SGFinDex, for example, has enabled our customers to have a consolidated view of their financial information on UOB Mighty to plan their finances more effectively.
We are already seeing a growing number of early adopters of the service – in the first half of 2021, UOB customers have synced their financial information with SGFinDex an average of seven times. We expect that the take-up rate and usage of SGFinDex will continue to grow as more people continue to bank, pay, and invest online.
We have also integrated SGFinDex’s capability into the way we engage our customers in wealth advisory.
For example, our relationship managers today are already using our AI-powered UOB Portfolio Advisory Tool (PAT) to have deeper conversations on investments with their clients. The UOB PAT layers historical market data with our customers’ financial holdings and risk appetite in real-time to create a portfolio to achieve their individual wealth goals.
With a comprehensive view of our customers’ portfolio across different financial institutions, the UOB PAT will enable our relationship managers to guide their clients more effectively in making informed investment decisions that meet their risk appetite and their financial aspirations.
In the area of payments, we collaborated with Visa in 2020 to be the first bank in the world to tap a new Visa API which enables our customers to add their Visa credit and debit cards securely into popular apps such as Fitbit Pay using UOB Mighty.
Our partners such as Singapore Airlines and SP Group are also tapping our APIs to enable UOB customers to use their reward points to pay bills and make purchases in their apps.
What are your thoughts about the Open Banking fintech players? Do you see them as partners or competitors? How do you expect to interact with them?
Janet: The current Open Banking model in Singapore enables data sharing only among players within the ecosystem. Taking SGFinDex for example, fintech players are currently not part of this ecosystem.
Moving forward, data sharing could be open to more players, including fintech players.
Given that they will need to obtain customer consent for their data, fintech players will need to focus on (1) having a secure information technology (IT) infrastructure and robust governance, risk management and security framework and policies, (2) building trust with their customers, and (3) having a clear customer value proposition (CVP) to justify why customers should share their data.
Experience from other markets has shown that the adoption of Open Banking among fintech players are still in their early stages.
At UOB, we remain open to working together with like-minded fintech partners who are able to complement or enhance our capabilities to serve our customers better.
What is your approach to ensuring data security in an open environment?
Janet: As a regulated entity and given the responsibility we have towards maintaining the trust our customers have placed in us, data security is of the utmost importance.
Our data governance policy and framework that we put in place at UOB sets out the principles and practices to manage the use and sharing of data while safeguarding our customers’ interest.
We also tap Singpass for authentication to ensure that personal data is accessed by customers in a secure manner.
Open Banking continues to be adopted around the globe, what future do you see for the financial services industry in Singapore as the framework matures?
Janet: The recent initiatives to develop an Open Banking environment in Singapore such as SGFinDex, and the ongoing plans to expand the ecosystem for these initiatives (e.g. stock market, insurers) is a sign of more progress to come.
For example, the Singapore Stock Exchange is slated to be added to SGFinDex in November 2021 and insurers will also be brought into the SGFinDex ecosystem in 2022 to enable customers to view their investments and insurance policy details on a single platform.
We expect to see the Open Banking ecosystem grow as more players come together to collaborate and as more people recognise and enjoy the convenience and seamless customer experience that Open Banking brings.
Customers will also opt for providers that can offer meaningful advice and insights based on the data which customers have shared. This will spur players within the Open Banking ecosystems to innovate continually to meet their customers’ expectations.
The growth in Open Banking will also continue to be built on simplicity and transparency which are key aspects valued by both regulators and customers.
Todd: The big opportunity has to be to up the value chain across Open Banking products, which includes:
Data – alternative credit scoring, wealth management, and predictive analytics;
Payments – greater ease in ‘linking’ your financial accounts (bank, e-wallet, crypto) to third-party apps and also, more cross-border payments interoperability, for example, Thailand-SG, Indonesia-SG, enabling pull payments. This means greater disintermediation;
Product APIs – end-to-end product onboarding through third-party apps, such as account opening, insurance sign-up, investment plan sign-up.
Brankas’ vision is to bring Open Banking to Southeast Asia and make modern financial services available to everyone. How far would you say you are on that journey?
Todd: In SEA’s emerging economies like Indonesia, Philippines, Vietnam, only around 50% of adults have bank accounts. Larger financial institutions often see the mass market as unprofitable and not worth the fuss. Open Banking is changing the economics of serving these mass consumer/SME segments that the incumbents have neglected. A financial services provider can provide the APIs so that a fintech can build those specialised products, onboard and serve those customers without relying on brick-and-mortar branches.
The financial services industry talks a lot about Open Banking, but has the person on the street got the message yet? And how will they get the message in the future?
Todd: Seamless Open Banking should just happen in the background. To the end consumer it’s as easy as linking, authorising, and sharing account details to create their own experience. The main person-on-the-street education needs to be on security and recognising the safe sharing of data. This is similar to the early days of online credit card processing which we saw some years ago.
How should the industry actively promote the advantages of Open Banking?
Todd: The industry has to focus on standards, education, policy advocacy, and innovation.
We must develop industry standards and agree upon ways of working and managing an industry data repository for Open Finance.
When it comes to education, we need both industry education (such as guidebooks for industry participants) and external awareness (including publications for mass-market education on safe Open Finance usages).
With policy advocacy, we need dialogue with government decision-makers, feedback on draft legislation and regulations, and the ability to represent Open Finance in international forums.
As for innovation, we should encourage startups to adopt and build on Open Finance infrastructure, supported by such things as hackathons, events, and awards.
This interview was originally published in The Paypers` Open Banking Report 2021.
About Todd Schweitzer
Todd is co-founder and CEO at Brankas, a leading Southeast Asia Open Finance technology provider.
About Brankas
Brankas is solving the "last mile" for Open Finance in emerging economies, providing secure APIs for payments, identity, transaction data, and more.
About Janet Young
Janet heads Group Channels & Digitalisation for UOB Group, leading delivery channels, fintech, digitalisation, ecosystems partnership initiatives and customer experience and advocacy.
About UOB
UOB is a leading Asian bank with a global network in 19 markets across Asia Pacific, Europe and North America.
About Pat Patel Principal Executive Officer at MAS. Following global roles in finance organisations, Pat ran Money20/20’s global content. Today he leads Elevandi.
About Elevandi Elevandi is a non-profit set up by the Monetary Authority of Singapore (MAS) to foster an open dialogue between the public and private sectors in order to harness FinTech for growth and development.
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