South Korea’s top financial regulator has kicked off a one-month pilot phase of ‘MyData’, a government-led programme aiming to give citizens the ability to manage personal financial data from different financial institutions on one platform.
The service allows customers of government-approved financial institutions to collect and access their financial information spread over multiple financial institutions in a single app, ranging from bank accounts to insurance and credit-card payments as well as stock-market investments and loan balances.
Seventeen financial institutions and fintech companies that have completed a closed beta-testing phase began offering MyData services on 1 December, according to the Financial Services Commission (FSC) press release. The list of participating institutions includes six major banks, financial investment businesses, credit-card companies, a mutual finance company and several fintech companies.
Twenty further service providers including ‘Big Techs’ and fintechs are scheduled to join by the end of this year. Sixteen additional MyData service providers including insurance companies and a credit bureau are then expected to join in the first half of next year, adding up to 53 companies in total being part of the service.
The financial authorities, service providers and other relevant institutions are to ‘closely monitor issues that need to be improved upon’ during the pilot period and ‘ensure a seamless preparation’ for the full launch on 1 January 2022, according to the press release.
MyData guideline revisions delayed kick-off
The FSC introduced revisions to the MyData guidelines on 29 July postponing the service’s launch due to industry requests. The guidelines originally stated that MyData operators should stop using the so-called ‘scraping’ method when collecting customer information and provide the MyData service using an API (application programming interface) method by 4 August, which was also the launch date of MyData as a whole.
Scraping is defined as a process whereby a consumer shares their financial institution usernames and passwords with a third party (such as a fintech) in order to gain access to data-driven financial services. Because of the Covid-19 pandemic, MyData operators had found it increasingly difficult to find development personnel for the mandatory standardised API method. As well, the FSC said at the time that it needed to run additional pilot tests on whether the API system could handle the related data traffic.
While, according to the press release, the FSC sees MyData as a possibility for consumers ‘to access their personal financial data in a more convenient and safe way’, it also enables service providers to receive broader and more in-depth information on their customers. The FSC is therefore quick to highlight authorities’ efforts to ensure the right to data privacy. These include a simplified personal authentication and identity verification process, stronger consumer safeguards and ‘the creation of an environment to promote fair competition between service providers’.
Last week (9 December), FSC chairman Koh Seungbeom met fintech industry representatives for talks on ways to further promote the growth of fintechs and financial innovation. Koh mentioned the need for regulatory improvements aimed at facilitating financial companies’ investment in fintechs as well as providing more opportunities to launch services such as MyData.
“The authorities will seek regulatory improvements to further promote digital innovation while ensuring consumer safeguards for online-based financial services,” said Koh, explaining how the FSC plans to support financial innovation in South Korea. He added that the authorities will also work on measures to further promote innovation in the payment, MyData-related and data privacy sectors.
Laying the groundwork for fintech innovation
The FSC presented its ‘work plan’ for 2021 in January outlining areas of focus as well as listing key achievements in 2017-2020. One of these achievements is specified as the ‘active promotion of competition and innovation in the financial industry’, with the FSC noting: ‘In order to promote and expand financial innovation, the FSC has also worked to establish the necessary infrastructures, including [a] regulatory sandbox, open banking and MyData in financial services.’
The FSC launched the East Asian country’s sandbox in April 2019, through which more than 100 ‘innovative financial services’ have been designated. The country, which has a population of about 52 million people, launched its open banking system two years ago.
In October 2020, the FSC’s then vice-chairman Sohn Byungdoo said the government would work to allow more account types to be eligible to sign up for open banking and to connect open banking with other digital finance infrastructures such as MyData.
The 2021 work plan only mentions MyData in the context of data privacy, stating that the authority aims to ‘work to create an effective data privacy environment through MyData businesses and by seeking improvements to the data transfer consent form’.
Australia expands Consumer Data Right
Australia’s government is expanding the Consumer Data Right (CDR) to make it easier for citizens and small businesses to undertake tasks such as making payments, opening and closing accounts and applying for a home loan.
The CDR expansion is part of the government’s release this week (14 December) of a 34-page response to the report ‘Inquiry into Future Directions for the Consumer Data Right’.
The country’s CDR legislation went live on 1 July 2020, with four major banks mandated to share access to consumer data for a range of personal accounts (with the customer’s permission).
The government’s response commits to ‘significantly strengthen and deepen’ the CDR’s functionality and use through the implementation of third-party action and payment initiation reforms, along with other recommended reforms that aim to grow the CDR ecosystem and foster greater international engagement.
Until now, consumers and small businesses have only been able to use the CDR to instruct businesses, such as their bank, to share their data with an accredited third party in order to make decisions regarding the products and services they purchase or to switch between providers more easily. The expansion of the CDR means that consumers and businesses will be able to instruct third parties to initiate actions on their behalf and with their consent.
‘Canada unveils ‘ambitious but achievable’ open banking plan’ – our news story (13 August 2021) on Canada’s government releasing a long-anticipated report that proposed January 2023 as the target date for launching an open banking system
‘Australia’s open banking regime enters next phase’ – our news story (14 July 2021) on the country’s open banking system moving to an important new step in its development
‘Canada open banking review to focus on data security’ – our news story (14 February 2021) on a government advisory committee investigating open banking in Canada putting security concerns centre stage