EDITOR NOTE: It was bad enough when banks were privately joining the "open banking" movement. In the name of better banking for all, financial institutions are giving Chinese Fintech firms access to your private financial data. Now the U.S. government is making your financial information even more accessible to anyone who wants it. On July 9, Joe Biden issued an executive order that allows your private financial data to be ported with ease and without manipulation. This order marks the end of financial privacy as amendments are being made to the Dodd-Frank reform act, Section 1033, that further sound the death knell on the U.S. dollar as the world reserve currency on September 30. In a Policy Paper on Chinese Fintech (Financial Technology) titled "End of the Wild West," President Xi Jinping is quoted as saying, "China will establish and improve the platform economy governance system, giving equal importance to development and regulation, amid efforts to boost fair competition, fight monopoly and prevent the disorderly expansion of capital." A direct threat to U.S. currency, in my opinion.One of the only ways to protect your wealth and keep your financial privacy, as the U.S. government gives it away, is to buy non-CUSIP gold and silver now.
The global open banking movement has gained important converts in the past month. The US and Canada both signalled their intentions to keep pace with the needs of a rapidly changing digital economy. They join more than 40 jurisdictions around the world implementing open banking at some level, according to a new report by the Mercator Advisory Group, entitled ‘Open banking goes worldwide: US inroads are keeping pace with global efforts’.
Open banking aims to boost competition by enabling third parties, such as fintech companies, to use customers’ financial data to develop new apps and services through application programming interfaces (APIs).
Until now, the US has taken a more a more market-led approach; however, this is about to change. On July 9, the US president Joe Biden issued an executive order on promoting competition in the American economy, which aims to allow consumers to switch banks more easily. The Consumer Finance Protection Bureau is encouraged to issue new rules under Section 1033 of the Dodd-Frank Act, which governs financial data access rights for customers of fintech firms and banking institutions. This would give banking customers the right to port their data from one bank to another.
MANY GOVERNMENTS ARE BEGINNING TO REALISE THAT DATA GOVERNANCE AND OPEN BANKING GO HAND IN HAND
While US is still working out its regulatory framework, its northern neighbour has come to the end of a three-year consultation process and has set a timeline for open banking implementation. Released on August 4, the Canadian finance ministry’s Advisory Committee on Open Banking’s report proposes January 2023 as an “ambitious but achievable” target date for launching an open banking system. Importantly, the Canadian version of open banking includes small and medium-sized enterprises (SMEs), as well as retail banking customers.
Even before the Canadian report’s release, open banking platforms were ready to launch. For example, on July 23 FinConecta and Ficanex Technology announced their open banking platform, tunl.marketplace, which provides credit unions and banks with access to curated fintech services.
In the Americas, the US and Canada have lagged behind other nations such as Mexico and Brazil, which implemented open banking regulations in 2018 and 2020, respectively. Other regions have also embraced the trend. In Asia-Pacific, for example, Australia, Japan, Hong Kong, India and Singapore have all passed open banking laws. Likewise, the trend is beginning to take off in the Middle East, particularly Saudi Arabia and the UAE. In late July, the Israeli Ministry of Finance published a draft of its “Economic Plan for Structural Changes”, which includes proposals for open banking.
However, the UK and Europe, particularly the Nordic countries, are still well ahead, according to Mastercard’s report, ‘Open Banking Readiness Index: The future of open banking in Europe’. It states that the UK and Nordic countries are best placed to make the most of open banking “thanks to a high number of open banking APIs, progressive regulators and consumer readiness”.
Africa is one region that is lagging behind. However, in Nigeria there is a not-for-profit industry group — the Open Technology Foundation — which has been set up to develop open data, and market players are also taking the lead in South Africa, according to a McKinsey discussion paper, called ‘Financial data unbound: The value of open data for individuals and institutions’.
It is important that emerging economies, like many in Africa, embrace the open banking wave and not be left behind in the digital age. According to the McKinsey paper, emerging economies stand to benefit more from open banking than advanced ones because they tend to have lower levels of financial inclusion and less financial depth. However, the report also says that capturing the full value of open data requires both a level of data standardisation and a breadth of data sharing that are not yet enabled in many economies. What many governments are beginning to realise is that data governance and open banking go hand in hand.
Originally posted on The Banker