Russia’s implementation of open banking is picking up pace, with a fintech specialising in providing loans to small- and medium-sized enterprises (SMEs) among the first companies to receive certification to participate in the country’s nascent open banking ecosystem.
Open banking aims to boost competition by enabling third parties, such as fintech companies, to use customers’ financial data (with their permission) to develop new apps and services. It is enabled by software intermediaries known as application programming interfaces (APIs).
The Bank of Russia set up standards for open banking – for example, for account information, payment initiation and information security – in October 2020 [RU language]. But in a different regulatory approach to other countries – for example, the UK – banks in the country are under no obligation to provide access to customers’ data via open APIs.
In a development announced in a press release [RU language] by the Russian Fintech Association (RFA), the fintech Tochka and the country’s eighth-largest bank (in terms of net assets) Promsvyazbank have this month become the first companies to receive RFA certification to use the central bank’s open banking API. The association said that tests had been successfully concluded to ensure that Tochka and Promsvyazbank were following the regulatory authorities’ open API standards, which allow banks and third-party fintechs to unlock and exchange data without proprietary agreements.
To ensure the safety of open APIs in Russia, the RFA operates a so-called ‘certification stand’ where banks and fintech companies are tested for compliance with the central bank’s standards. According to the RFA in a further press release, several other financial institutions are in the preparatory stages of being tested.
Tochka provides services to small- and medium-sized enterprises (SME) – when applying for a loan, SMEs will not need to provide the bank with paper account statements from another bank but can instead simply consent to the transfer of this information in digital form. Tochka’s accreditation means that the exchange of data from SME accounts between a bank and a fintech will become Russia’s first open banking ‘use case’.
Brazil pushes back data-sharing phase
Open banking is ‘set to become globally ubiquitous’, according to a recently published report focused on developments in ten European countries.
In South America ubiquity has become that little bit further ahead with Brazil’s central bank having decided to push back the launch of its second implementation phase. The Banco Central do Brasil (BCB) announced the move in a press release [Portuguese language], saying it was ‘in response to a formal request from the Open Banking Governance Structure’.
The central bank published the fundamental requirements for the implementation of open banking in April 2019. After a delay caused by the Covid-19 pandemic, the project launched in February this year, when financial institutions were mandated to share data about products, service channels, services and branch locations.
The second phase of open banking’s rollout – which is due to comprise four phases in total – involves sharing customer registration and transaction data. It has been pushed back from 15 July to 13 August because participating institutions were ‘finalising the tests to obtain certifications for approval and registration of their APIs’, the release stated.
The BCB went on to say that it was reinforcing ‘its commitment in order for open banking to achieve its objectives of greater competition, efficiency in the financial system and financial inclusion of the population, remaining vigilant in the implementation process and sparing no efforts’.
Brazil’s open banking project is among numerous state-backed initiatives to promote structural change across the financial sector to keep pace with, and capitalise on, technological advances. These include the launch of state-run instant payments system ‘Pix’ as well as the creation of a regulatory sandbox.
In the third stage of open banking’s rollout, services should to be able to be shared, introducing the ability to pay bills and make money transfers outside a customer’s normal bank environment. “It is a time when there is a combination of open banking and Pix,” the central bank’s regulation director Otávio Damaso said in February. In the final phase, other financial products and services such as insurance, pensions and investments are to be integrated into the open banking infrastructure.
Philippines approves ‘Open Finance Framework’
On the other side of the globe, the Philippines’ central bank has approved the guidelines for its ‘Open Finance Framework’. This is an initiative under its ‘Digital Payments Transformation Roadmap’, which aims at having 70 per cent of Filipino adults with transaction accounts by 2023.
Open finance describes the extension of open banking data-sharing principles to enable third-party providers to have access to customers’ data across a wider range of financial sectors and products.
Bangko Sentral ng Pilipinas (BSP) set out its plans in a draft circular in February, which included creating what would be known as the Open Finance Oversight Committee (OFOC), an industry-led body to ‘exercise governance on the activities and participants of the open finance ecosystem’.
The bank’s monetary board approved the adoption of the framework, which it sees as ‘a key enabler for digital transformation and financial inclusion’, on 10 June, according to a press release. The BSP expects a tiered implementation of the framework based on data sensitivity, data types and data holder. It says the tiers would not necessarily be sequential, and multiple implementations may occur simultaneously.
The BSP told Global Government Fintech in February that it was reviewing more than 500 responses to its draft. When compared to the draft, the final version of the circular includes some changes to the section concerning the OFOC. Added, for example, is a paragraph stating ‘the OFOC shall define functions, roles and responsibilities of the Committee and the participants. It shall adopt policies in monitoring participants’ compliance with the established policies […] including the corresponding sanctions or penalties for non-compliance’.
Similarly regarding sanctions, another addition in this section states that ‘the Bangko Sentral may issue directives to or impose sanctions against the OFOC, such as suspension or revocation of any authority of the OFOC […], without prior notice, to promote the safety and soundness of the financial system and/or to protect participants, its customers or the general public’.
The BSP also added a paragraph concerning co-operative regulatory oversight, stating it recognised that other regulatory or supervisory authorities not under its supervision may be involved in the framework and pledged to co-ordinate with them.
“Open finance is definitely not a sprint but a marathon. It will be a long and challenging run, but just like any other sport we need to properly prepare and condition ourselves to finish strong in this race,” said BSP governor Benjamin Diokno adding that “this initiative will bring us closer to our goal of promoting an inclusive and sustainable recovery and growth.”
Global Government Fintech’s dedicated open banking / open finance section
‘Australia’s open banking regime enters next phase‘ – our news story (14 July 2021) on Australia hitting the next milestone in its implementation of open banking with new Consumer Data Right (CDR) legislation coming into effect
‘Open banking ‘set to become globally ubiquitous’: report – our news story (21 June 2021) on open banking ‘set to become globally ubiquitous’, according to a report focused on open banking’s development in ten European countries