Open Banking Research Articles

ENHANCING THE COMPETITIVENESS OF INDONESIA’S FINANCIAL SERVICES SECTOR IN THE DIGITAL ERA THROUGH OPEN BANKING: LESSONS LEARNED FROM THE UK’S EXPERIENCE

In 2021, Bank Indonesia launched the National Open API Payment Standard (SNAP) to facilitate interoperable data-access for Indonesia’s digital payments sector. This article examines the lessons learned from the UK’s experience in open payments to improve the regulatory and institutional framework of Indonesia’s open banking regime. This article employs a comparative legal analysis of the UK’s open banking regime and concludes that Indonesia’s open banking regime could be improved by expanding the delivery of the Open API standards enabling interoperable data access for the entire financial services sector through an outcomes-based approach. Such expansion could be facilitated by encouraging collaboration between banks and fintechs and by creating an Open Banking App Store to increase user adoption, enhance product visibility, and widen access to digital financial services for Micro, Small, and Medium Enterprises (MSMEs)

A Semantic Model for Enhancing Data-Driven Open Banking Services

In current Open Banking services, the European Payment Services Directive (PSD2) allows the secure collection of bank customer information, on their behalf and with their consent, to analyze their financial status and needs. The PSD2 directive has lead to a massive number of daily transactions between Fintech entities which require the automatic management of the data involved, generally coming from multiple and heterogeneous sources and formats. In this context, one of the main challenges lies in defining and implementing common data integration schemes to easily merge them into knowledge-base repositories, hence allowing data reconciliation and sophisticated analysis. In this sense, Semantic Web technologies constitute a suitable framework for the semantic integration of data that makes linking with external sources possible and enhances systematic querying. With this motivation, an ontology approach is proposed in this work to operate as a semantic data mediator in real-world open banking operations. According to semantic reconciliation mechanisms, the underpinning knowledge graph is populated with data involved in PSD2 open banking transactions, which are aligned with information from invoices. A series of semantic rules is defined in this work to show how the financial solvency classification of client entities and transaction concept suggestions can be inferred from the proposed semantic model.

Integrative Review of International Publications about Open Banking

Open Banking is an emerging and relevant topic in the banking industry that has been explored worldwide. This refers to an initiative aimed at promoting the integration of banking systems through an open platform, allowing different financial institutions to share their clients’ data and services in a secure and standardized manner. Given the relevance of the subject, there is a need to understand scientific publications on the topic and highlight their contributions to the Science of Administration. In this sense, this article aims to conduct an integrative analysis of the literature on Open Banking. This work involved a structured process of selection and integrative analysis based on four databases, which resulted in 425 works. These studies underwent a filtering process, resulting in a portfolio of 26 articles aligned with the subject and representing the current state of the topic from the researcher’s perspective. The results indicate that the studies are focused on topics such as system integration, data security, and operational models, mainly related to the initial phases of Open Banking implementation. Additionally, the study highlights the lack and need for studies focused on corporate and business aspects, such as competition strategies, management models, and strategic positioning in this new market.

Integrative Review of International Publications about Open Banking

Integrative Review of International Publications about Open Banking

Open Banking's Promise of a Financial Revolution: Are We Falling Short?

Open Banking's Promise of a Financial Revolution: Are We Falling Short?

СТАНОВЛЕННЯ СЕКТОРУ FINTECH: МОЖЛИВОСТІ ТА РИЗИКИ В УМОВАХ ЦИФРОВОЇ ЕКОНОМІКИ

The article is devoted to the study of the state, trends and prospects of the development of the FinTech sector, the identification of opportunities and risks of its development in the conditions of the digital economy, and the determination of measures to accelerate such development. The main trends of FinTech development are analyzed. The advantages of using fintech providers have been determined, in particular: fast provision of financial services; a small number of regulatory requirements; the possibility of cooperation with banks; facilitating access to instant funds for urgent needs or loans for small amounts for people with low incomes; increasing financial convenience for users, since access to services is possible from any place where Internet access is available. The types of companies providing fintech services, the basic groups of digital technologies, on the basis of which fintech services are implemented, were studied. The possibilities of technology application are summarized: blockchain, big data, Internet of things, cloud computing, artificial intelligence, biometric technologies, augmented/virtual reality, embedded finance, SAAS, Open Banking by types of financial activities and services. Factors and risks of FinTechs development are studied: liquidity mismatch, speculative bubbles, interconnectedness, systemic importance, risk of regulatory problems, displacement of traditional jobs and creation of new forms of inequality. To accelerate the development of FinTech at the international and national levels, it is proposed to carry out groups of measures depending on their content: measures of a technological nature (acceleration of the development of technologies on which FinTech is based); measures to create a competitive environment and effective functioning of the fintech market; educational activities; regulatory measures at the state level; state measures to stimulate innovation; cyber security measures; implementation of international coordination. Keywords: Fintech, digital economy, digitalization, electronic payments, risks of fintech activities, cyber security, fintech provider, financial services, digital technologies, fintech startup.

Influence of Blockchain Technology on Open Banking: A Scoping Literature review

Influence of Blockchain Technology on Open Banking: A Scoping Literature review

Predicting the Intention to Use the Investment Aggregate Functionality in the Context of Open Banking Using the Artificial Neural Network Approach

This study investigates the determining factors influencing the intention to use investment aggregator functionality in the context of Open Banking. A survey involving 167 participants was conducted, employing an in-depth analysis through Artificial Neural Networks (ANN). The findings reveal that the construct of "innovativeness" is the most influential factor for individuals’ intention to utilize investment aggregator functionality. Furthermore, “trust,” “social influence,” “optimism,” and “perceived usefulness” were identified as additional significant factors. Notably, individuals already engaged in investment activities, including variable income or fixed income investments, exhibited a higher inclination to adopt technology. These findings contribute to companies and banks considering the implementation of Investment Aggregator technology by providing valuable insights for effective adoption strategies. Additionally, this study offers technical contributions to Open Banking technology and aggregating tools, expanding knowledge in the field and presenting practical recommendations for companies to successfully apply this technology. Moreover, the study contributes to the deepening of the theme and the advancement of knowledge in non-linear methods, enriching the understanding of this evolving field.

Izazovi digitalizacije finansijskih transakcija

The accelerated development of information technologies has fundamentally changed and improved the functioning of the global financial system, financial markets and economic exchange. Digitization of the financial sector has generated new financial opportunities, improved the quality of financial services, enabled faster and cheaper financial transactions. The challenges accompanying the digital transformation of finances are related to the regulation and security of using new digital products, the possible abuse of digital money transfers, as well as the emergence of technology-based decentralized finances, which may be a factor of factor of financial instability in direct copmpetition with the traditional financial sectors. This paper discusses the current digital transformation in traditional financial systems and decentralized digital finance (DeFi) as an emerging technology enabling decentralized exchange of new forms of digital money and payment instruments. The products and services of different DeFi platforms are constantly evolving and may become part of open decentralized finance, i.e. they can function as a single financial platform. Open Finance would enable the standardization of data exchange and interoperability of different DeFi systems, but there is still a fact that DeFi systems emerged as independent systems that are not part of a common conceptual framework. The term Open Finance refers to the future open financial system, as a continuation of the development initiated by open banking, with the aim of making financial resources of clients more accessible in a wider range of services and platforms. The Open Finance concept is also being developed within the traditional financial sector. The key condition for the development of open finance is user trust and "the creation of a wider single data market" (European Union, 2022: 5). The planned concept of open finance includes: a wider choice for customers through access to a more customized and personalized range of services and products; improving access to and use of financial services in all business segments; in line with data protection rules, providing consumers and businesses with greater transparency about how their data is used; facilitating data interoperability in open finance; embedding an open finance approach to client-centred services in a general cross-sectoral framework (European Union, 2022: 6). Adequate regulation of traditional finance and decentralized digital finance is the basis of financial and economic stability. Central banks and regulatory authorities should integrate digital innovations in complex and dynamic decentralized financial sectors in order to monitor transactions, preserve financial stability and prevent money laundering. One part this paper focuses on virtual currencies. From the viewpoint of central banks, virtual currencies are not money in the true sense of the word, for a number of reasons: they are not regulated by laws (as they have their own rules and payment systems); they do not fully perform all the functions of money; they are not a generally accepted means of exchange and payment; they currently have a limited number of users; etc. Yet, we cannot ignore their likely expansion in the future, nor the fact that a significant amount of money is invested in virtual currencies.

Digitalization of financial services of banks in Kazakhstan: trends and prospects of development

The article is devoted to the issues of digitalization of the financial market of Kazakhstan, trends and development of the use of digital technologies in the services of commercial banks as a financial institution. In connection with the development of the FinTech industry, it outlines measures aimed at expanding the range of digital services of banks based on "Digital Kazakhstan" State Program. Theoretical information on the digitalization of banking activities is given with a review of domestic and foreign literature on the digitalization of the banking system. Based on national reports and global data on the development of mobile banking, the study was conducted using comparative and statistical analysis methods. Based on the concepts of Open API, Open Banking, the transition of commercial banks of Kazakhstan to modern technological changes and the state of their implementation in banking activities is considered. With identification of trends in the development of the Financial Information Technology Market in the Internet and mobile banking, the article presents experience and prospects of implementing Open API technology in the activities of domestic banks. During the analysis of the data of domestic banks such as commercial banks of the Republic of Kazakhstan: CenterCredit bank, Halyk Bank, Kaspi Bank, ForteBank and Jusan Bank, Freedom Finance Bank, their current state, and possibilities of using digital technologies, prospects for development were outlined.

Open Banking: Opportunities and Risks

Open Banking: Opportunities and Risks

Open Banking

Das OpenBankingProject (OBP) wurde im Februar 2019 gegründet und hat zum Ziel, basierend auf bestehenden Standards, im Rahmen von Open Source zugängliche technische Standardschnittstellen (APIs, Application Programming Interface) zur Verfügung zu stellen, die Akteure zu vernetzen und Wissen im Kontext von OpenBanking aufzubereiten und zu teilen. Es besteht aktuell aus den sieben Partnern Aity, Avaloq, Ergon, Finnova, Finstar (HypiLenzburg), Inventx, Netcetera und den Mitgliedern Andrion, FRKB, beconn, BEKB, Experian, Finform, Intrum, KYCSpider, LLB, Coop (Microspot), Migrosbank, OperCredits, Post, Postfinance, PXL Vision, SOWA, Swisscom, SwissSign, Thurgauer Kantonalbank. Die Universität St.Gallen mit der Dozentur für Unternehmenstransformation ist die wissenschaftliche Partnerin. Das Business Engineering Institute St. Gallen ist Gründungsmitglied des OpenBankingProjects und koordiniert die Organisation, den Aufbau einer aktiven Community sowie die Umsetzung von kundenzentrierten Anwendungsfällen.

СТАНОВЛЕННЯ СЕКТОРУ FINTECH: МОЖЛИВОСТІ ТА РИЗИКИ В УМОВАХ ЦИФРОВОЇ ЕКОНОМІКИ

The article is devoted to the study of the state, trends and prospects of the development of the FinTech sector, the identification of opportunities and risks of its development in the conditions of the digital economy, and the determination of measures to accelerate such development. The main trends of FinTech development are analyzed. The advantages of using fintech providers have been determined, in particular: fast provision of financial services; a small number of regulatory requirements; the possibility of cooperation with banks; facilitating access to instant funds for urgent needs or loans for small amounts for people with low incomes; increasing financial convenience for users, since access to services is possible from any place where Internet access is available. The types of companies providing fintech services, the basic groups of digital technologies, on the basis of which fintech services are implemented, were studied. The possibilities of technology application are summarized: blockchain, big data, Internet of things, cloud computing, artificial intelligence, biometric technologies, augmented/virtual reality, embedded finance, SAAS, Open Banking by types of financial activities and services. Factors and risks of FinTechs development are studied: liquidity mismatch, speculative bubbles, interconnectedness, systemic importance, risk of regulatory problems, displacement of traditional jobs and creation of new forms of inequality. To accelerate the development of FinTech at the international and national levels, it is proposed to carry out groups of measures depending on their content: measures of a technological nature (acceleration of the development of technologies on which FinTech is based); measures to create a competitive environment and effective functioning of the fintech market; educational activities; regulatory measures at the state level; state measures to stimulate innovation; cyber security measures; implementation of international coordination. Keywords: Fintech, digital economy, digitalization, electronic payments, risks of fintech activities, cyber security, fintech provider, financial services, digital technologies, fintech startup.

Global Digital Transformation Trends: Financial-Economic Sector

In recent years, the financial sector has been a leader in digital transformation. An additional driver of its accelerated digitalization was the COVID-19 pandemic, which contributed to the active spread of mobile banking, contactless payments, digital services for managing investment portfolios, etc. The largest banks and insurance companies play a leading role in the digitalization of financial services. New fintech companies have emerged both within large banking ecosystems and as stand-alone start-ups providing financial services on their own. The digital transformation of the financial sector is based on the integration of distributed ledger systems, cloud technologies, big data analysis and AI. As a result of the use of digital technologies, new business models are being built. For example, the Open Banking system, which is based on API (Application Programming Interface) technologies and is designed to exchange information necessary for the development of financial products and services, has become widespread. Such a system allows non-financial organizations to offer financial products and services personalized to the needs of a particular client.

Open banking: Credit market competition when borrowers own the data

Open banking facilitates data sharing consented to by customers who generate the data, with the regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks’ customer transaction data enables better borrower screening for fintechs. Open banking promotes competition if it helps level the playing field for all lenders in screening borrowers; however, if it over-empowers fintechs, it can also hinder competition and leave all borrowers worse off. Due to the credit quality inference from borrowers’ sign-up decisions, this remains true even if borrowers have the control of whether to share their banking data. We also study extensions with fintech affinities and data sharing on borrower preferences.

Smart City: Sharing of Financial Services

Contemporary life is closely interconnected with numerous phenomena, which have appeared in our life in recent decades. The concepts of a smart city, digitalization of the economy, and the sharing economy are among them. These factors create new opportunities for businesses operating in modern markets. The article considers the sharing services in digital payment operations for achieving the Key Performance Indicators (KPI) of a smart city. The goal of the research is to determine the costs of sharing economy implementation in the financial sector of a smart city. The study takes the example of Rome’s experience. The authors consider KPIs selected by the municipality of Rome as a measure of smart city implementation and their provision by sharing services in financial operations. The authors specify the structure of the costs of shared financial services for a smart city and for Fintech companies operating with open banking, which is followed by the cost functions peculiar to these operations of Fintech companies. The authors demonstrate the point at which a Fintech company starts earning a positive profit on these services via operating leverage.

Особености на финтех компаниите в контекста на индустрия 4.0

There is no doubt that technology occupies a very important part of our daily lives today, and that the Fourth Industrial Revolution covers all industries. The financial sector is one of the sectors that has also been greatly influenced by Industry 4.0. Banking. Accounting, insurance, the tax function, cash management, control, and many others are developing thanks to the use of digital technologies and the automation of financial processes. Fintech companies, the use of mobile devices in banking, the crypto-banking system based on the blockchain technology, as well as the open banking systems are developing so dynamically that they have drastically transformed the financial sector in recent years.

The Value of Open Banking Data for Application Credit Scoring: Case Study of a Norwegian Bank

Banks generally use credit scoring models to assess the creditworthiness of customers when they apply for loans or credit. These models perform significantly worse when used on potential new customers than existing customers, due to the lack of financial behavioral data for new bank customers. Access to such data could therefore increase banks’ profitability when recruiting new customers. If allowed by the customer, Open Banking APIs can provide access to balances and transactions from the past 90 days before the score date. In this study, we compare the performance of conventional application credit scoring models currently in use by a Norwegian bank with a deep learning model trained solely on transaction data available through Open Banking APIs. We evaluate the performance in terms of the AUC and Brier score and find that the models based on Open Banking data alone are surprisingly effective in predicting default compared to the conventional credit scoring models. Furthermore, an ensemble model trained on both traditional credit scoring data and features extracted from the deep learning model further outperforms the conventional application credit scoring model for new customers and narrows the performance gap between application credit scoring models for existing and new customers. Therefore, we argue that banks can increase their profitability by utilizing data available through Open Banking APIs when recruiting new customers.

Why are open banking models in Europe underperforming?

This study investigates the foundations underpinning open banking models in Europe and identifies levers to improve their performance. Based on a review of the literature, it distinguishes four contexts for open banking: platformisation, data sharing, FinTech and regulation. The users of open banking services are surveyed to determine factors driving adoption and identify those entities that customers trust with their data and funds. The results indicate that the slow adoption of open banking services is in large part due to customers’ poor understanding of such services. The results also show the importance of usefulness and trust in driving adoption. These findings highlight the disproportionate attention being given to service provider infrastructure and the ecosystems of new entrants, and indicate that more consideration should be given to the actual users of open banking frameworks. In response to the findings, the study proposes a roadmap to mitigate the main weaknesses in current open banking models. The conclusions of this study are relevant not only to the development of open banking regulations in other territories, such as the USA and Canada, but also to the extension of data-sharing regulations to non-banking sectors.

Open banking and digital transformation in Italy: The current situation and the challenges ahead

This paper discusses the results of the Global Open Banking Report, released by CBI and PricewaterhouseCoopers in December 2021. Starting with a brief review of the current state of open banking at the global level, the paper switches focus to the European scenario and on the Italian market in particular, highlighting the disruptive nature of open banking, and its potential for significant growth. The study finds that although open banking is still in a development phase in Italy, banks and other players are constantly exploring collaborative initiatives and investing in innovative services that go beyond the traditional banking sector, marking a transition from open banking towards open finance.