“Give the green light” for the open banking

23 May 2022

According to Mr. Nguyen Hung, TPBank's General Director, new business models such as Open Banking need to be "green lighted" and Open Banking thinking needs to be realized in the right business strategy that banks have target row.

Open Banking is considered as one of the important milestones in the financial technology innovation process in the banking system, specifically what is this mark?

Open Banking is a prominent trend in the financial technology (Fintech) industry that has been mentioned many times in recent years. Accordingly, banks and financial institutions open application programming interfaces (APIs), allowing third parties to access the necessary data system to serve the development of new applications and services. provide more convenience for customers, and provide customers with more transparent financial options based on the user's own agreement with the bank and the service provider.

In other words, Open Banking is opening a new era in which customers can use banking services at any platform according to their purpose. With banks actively launching digital banking products under the Open Banking - Banking as a service (BaaS) model, even in Vietnam, we can see that people are becoming more and more familiar with e-wallets. Online banking provides more diverse services that only banks can handle before, the most popular are payment and transfer, but surely the future will be even more diverse. It can be said that Open Banking is increasingly influencing the entire way of operating and providing services of the banking industry.

On the customer side, thanks to Open Banking, they can use banking products from many different applications, in addition to digital banking. By closely linking in the Open Banking ecosystem, users can also see their overall financial picture from bank accounts or e-wallets, even online shopping marketplace applications ( e-commerce). In addition, people who have not yet been able to access traditional banking services or people with low incomes also receive more benefits, improving their access to credit with alternative financial data (such as financial data). from telecommunications and mobile networks, etc.).

For banks, Open Banking helps to reach a wide range of customers at a shared cost through partner platforms. From there, the bank can create personalized products and services to retain customers longer and increase the number of loyal customers more sustainably. In other words, banks in the near future will need to focus more on generalizing and optimizing core products to serve more diverse customer needs across different product and service platforms. in the digital ecosystem.

In addition, having a more diverse source of customer data helps banks to score customer credit more accurately. This grading in Vietnam may not be popular yet, but looking at major markets like the US, China... it can be seen that, with the current fast digital conversion speed, users in Vietnam are also will soon raise awareness about the importance of Open Banking in accessing banking and financial products.

In some countries, the scope of Open Banking is mainly payment accounts or products for loans, mortgages, credit cards and investment funds..., so what is the task in Vietnam?

Looking at the Fintech picture in Vietnam, more than 50% of the market share belongs to e-wallets. Therefore, it can be affirmed that payment - money transfer operations are taking up the largest proportion and gaining the most advantage in the current Open Banking trend. However, in the last 1-2 years, with the emergence of the Covid-19 epidemic, online shopping and cashless payments have become more popular, the wave of "buy now, pay later (Buy now, pay later). later)" is increasing rapidly.

A good example of this wave is a postpaid wallet product that is receiving a positive response from e-wallet users. This can be considered as a typical BaaS product that TPBank and an e-wallet brand have embarked on, allowing customers to get pre-approved a small amount of money to pay electricity, water, and internet bills. …, without having funds available in the account. Accordingly, there are more than 60,000 people registered to use the product after only the first 2 months of launch and this number is still increasing daily.

Besides, with the improvement of the legal corridor in the Fintech field, investment, savings, credit card products ... under the Open Banking model are also continuously researched and deployed. Surely in the future, Open Banking will expand its scope to all retail banking products, even small and medium enterprises and micro enterprises.

In many developed markets such as the UK, Australia, etc., participation in Open Banking activities is mandatory, while in some Asian countries and territories such as Singapore, Taiwan, Hong Kong..., banks have autonomy in connecting with Open Banking partners. With Vietnam, in your opinion, which direction is suitable for this model?

In the digital age, Open Banking is an inevitable trend, but it is really difficult to determine a specific direction in the form of a "recipe" because it depends on many factors and specific implementation conditions.

In Vietnam, Open Banking activities are being deployed by banks at many levels, under many different service forms, and one of the popular approaches can be mentioned as building Open API platforms, while most banks are providing these platforms with detailed documentation and connection instructions. Although the level of "openness" in business development, risk appetite, as well as the variety of information and data provided has not been standardized, mainly coming from the needs of each bank, but it can be said that This is an important turning point and is the basis for the development of Open Banking in Vietnam.

On the side of TPBank, with BaaS development orientation considered as an important strategy, the isolated test environment "Sandbox" for developers is also being "enriched" day by day. In addition, the technology infrastructure for connection is also focused on upgrading to not only be optimal in terms of compatibility with a variety of partners, but also meet domestic and international connection and security standards. .

Open Banking application to exploit and expand new customers for banks: Since this model was implemented, many Vietnamese banks have achieved a rate of over 90% of transactions between customers and banks. digital channel; Vietnamese banks are assessed to have the fastest speed in digital banking penetration and application in the region (according to a September 2021 assessment by consulting firm McKinsey); This is also the motivation for banks to continuously develop banking services on digital channels (payment - money transfer, deposit, savings, bank-linked insurance, etc.) to meet the demand. Online transactions anytime, anywhere of people and businesses.

From the above eKYC cooperation model, depending on business development goals as well as market needs, banks can further exploit different BaaS services with suitable partners. Above all, customer needs remain at the core in determining how Vietnam's future of Open Banking will be developed.

To ensure safety and develop Open Banking services, do you think it is necessary to issue appropriate legal frameworks soon?

It is certainly so and I believe that the management agencies, especially the State Bank, have been very active in developing policies and legal frameworks to both ensure optimal advantages of the bank. Open Banking, both meets safety and security standards for the system and users using financial - banking services.

Specifically, in 2017, the Governor of the State Bank established the Fintech Steering Committee, which researched, built the connection, and shared data through the open application program interface (Open API). ) is one of the key tasks. Recently, under the direction of the Prime Minister, the State Bank of Vietnam has consulted on a draft Decree providing for a mechanism for controlled testing of financial technology activities in the banking sector.

This experimental mechanism is clearly one of the most preferred policy tools and approaches adopted by many countries. This option allows testing solutions with real transactions in a controlled environment, limited in scope, scale, and time of testing.

According to the draft, data sharing via Open API belongs to one of six priority groups of areas to participate in the trial, the remaining five areas include credit granting on technology platforms; credit scoring for peer-to-peer lending (P2P Lending); application of blockchain technology, distributed ledger (Blockchain Technology, DLT) in banking activities and application of other technologies in banking operations.

In addition, Directive No. 16/CT TTg of the Prime Minister on strengthening the capacity to access the 4.0 technology revolution can also be considered as a foundation for agencies and departments to build information technology infrastructure. information and digital technology tensure network safety and security, create conditions for people and businesses to easily and equally access opportunities to develop digital content.

To deploy Open Banking, what requirements do banks need to ensure?

As mentioned above, in order to implement this activity, the preparation of an appropriate infrastructure/technology foundation is the first necessary condition. Currently, most banks in Vietnam do not have much preparation from the beginning for this expansion, so upgrading and innovation is extremely important and needs to be implemented as soon as possible to promptly meet the needs of customers. meet business needs and general trends.

Besides, the Open Banking mindset must be realized in the business strategy that banks are aiming for. We need to get the "green light" from senior leaders for new business models and new ways of providing products and services.

Finally, when the number of money and credit transactions, as well as information sharing, are increasingly focused in cooperation between banks and Fintech companies, the balance of risk appetite needs to be focused. than. On the bank's side, all activities take place under the strict control of the State Bank with very high requirements on information safety and system security, and risk prevention. Meanwhile, Fintech companies place a higher priority on customer experience in the direction of fast - convenient - easy to access, which has not been governed by too strict regulations.

Therefore, the cooperation between banks and Fintechs requires a big change in the risk management mindset of the bank and a more complete improvement of the risk control mechanism of Fintech companies, especially related to to secure customer information and prevent risks from cybercriminals, so that unnecessary losses and vulnerabilities do not occur, while still ensuring the goal of serving users and developing business.

Lên đầu trang

Public link

Please use the above public link if you want to share this noodl on another website.