Open banking, which allows data to be shared between banks, financial institutions and fintech with the consent of customers, can further facilitate financial inclusion and easier access to finance for small and medium-sized enterprises (SMEs), the experts.
Open banking provides open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through application programming interfaces (APIs).
“In the new open banking ecosystem, APIs are a channel for doing business,” said Jayanta K Bhowmick, Senior Systems Analyst (Additional Director) at Bangladesh Bank.
“By adopting and implementing APIs, banks can extend and improve their services and offerings,” he said.
“Open banking is mistakenly believed to make customer data openly available to anyone,” he said.
“But it strives to control both the circle of eligible third parties and to allow customers to control the sharing of their financial data, by requiring their explicit consent,” he explained.
Bhowmick was on his way to a roundtable called “API and Open Banking: New Service Innovation for Banks and Fintech Companies” hosted by the Bangladesh Association of Information and Software Services (BASIS) at a hotel in Dhaka on Wednesday.
“With open banking, the banking digital value chain is opened up, allowing third parties to participate in the previously closed value chain,” he added.
He said that open banking was an efficient system that can absorb shocks in extreme situations such as Covid-19, simplify know-your-customer processes, overcome problems of lack of documentation, and allow person-to-person loans and crowdfunding.
“It also encourages healthy financial behaviors, expands access to credit, supports debt rehabilitation and increases competition in the financial services market,” he said.
At the roundtable, bankers and fintech companies urged the central bank to introduce supporting guidelines and a standardization process so they can share data with customer consent while maintaining data privacy and security.
Todd Schweitzer, founder and CEO of Brankas, an open banking fintech company that operates in the Philippines and Singapore, said customers own their financial data and should be able to access their financial products beyond customer-owned channels. bank.
The system needs technology, products and policies that allow clients to safely use the financial services of qualified third-party providers, he added.
The roundtable also emphasized that if any user wishes to share data with a third party to obtain financial services, such as loans, custodian banks must have data sharing provisions.
Md Khurshid Alam, CEO of Bangladesh Bank, said he shared the central bank’s commitment to providing necessary policy and regulatory support for open banking in Bangladesh.
He said the central bank would make it easier for young fintech entrepreneurs to innovate by providing them with all kinds of regulatory support. He suggested that banks engage in larger collaborations with local fintech companies.
Fahim Mashroor, chairman of the BASIS fintech standing committee and CEO of bdjobs.com, said open banking was the best way to solve the big problem of banks’ low loan disbursement rate to the micro and SME segment.
The problem of high operating cost for banks to disburse and repay loans for micro and SMEs can be solved by digital loans based on open banking, he said.
BASIS President Russell T Ahmed and Vice President Fahim Ahmed were also present.