Since its introduction in 2018 by the UK, European Union and Mexico, Open Banking has grown into a powerful force for financial innovation.
Creating the world’s best Open Banking regime
Today, countries like Brazil, India and South Korea are leading the charge, expanding Open Banking into Open Finance by integrating services such as insurance, investments and pensions.
Meanwhile, new regulatory frameworks in Australia, South Korea and the United Arab Emirates are pushing Open Banking beyond financial services into sectors like energy, telecommunications and healthcare.
These diverse experiences offer critical insights into how Open Banking can be structured, its benefits and its challenges.
They also provide a roadmap for other nations looking to implement similar frameworks.
Why Open Banking Matters
Before Open Banking, data sharing was often done through screen scraping – a practice where fintechs copied user data from online banking interfaces.
While widely used, it was inefficient, prone to errors and posed security risks.
Open Banking eliminates these risks by using Application Programming Interfaces (APIs) to securely share financial data, ensuring transparency and efficiency.
However, implementing API-based systems comes with costs, including building and maintaining API infrastructure, managing consent protocols and strengthening cybersecurity measures.
Banks often resist such mandates, viewing customer data as proprietary.
On the other hand, excessive regulatory burdens could stifle innovation or make banking unprofitable. The balance lies in fostering collaboration between regulators, banks and fintech firms.
Global Success Stories in Open Banking
South Korea: A Blueprint for Comprehensive Open Finance
South Korea introduced Open Banking in 2019, requiring banks to share account balances and transaction histories via APIs.
The system quickly expanded beyond traditional banks to include stockbrokers, insurers and even Big Tech companies.
By 2022, Korea mandated data portability, allowing consumers to share financial and non-financial data across healthcare, energy, transportation and education sectors.
This integration has fostered the rise of major fintech players like Toss and has pushed traditional banks to modernise their digital offerings.
A key takeaway from South Korea is that regulatory alignment between payments infrastructure and Open Banking – in this case, managed by the Korea Financial Telecommunications and Clearing Institute – ensures seamless API compatibility, driving widespread adoption.
Brazil: The Role of Real-Time Payments
Brazil’s Open Banking framework, launched in 2021, achieved rapid adoption by integrating with Pix, the country’s central bank-powered real-time payments system.
Within its first year, the system attracted more users than the UK achieved in four years. By 2024, Brazil processed over 64 billion Pix transactions, outpacing debit and credit card usage.
Brazil’s model emphasises interoperability over data portability, ensuring seamless financial transactions without requiring consumers to transfer data between platforms.
The country’s proactive regulatory approach also enabled payment initiation services from the outset, a key differentiator from Mexico, whose lack of standardised APIs has hindered adoption.
India: Voluntary Participation and Financial Inclusion
India’s Open Banking framework is part of the broader India Stack, which includes Aadhaar (digital identity), the Unified Payments Interface (UPI), and the Account Aggregator (AA) network.
Unlike other models, India’s Open Banking system is voluntary, yet has seen massive adoption due to low-cost infrastructure and strong digital banking capabilities.
The Account Aggregator system allows consumers to share financial information with third parties for credit access and personal finance management.
Unlike traditional Open Banking models, aggregators do not store or process user data, ensuring consumer privacy and trust.
As of 2023, India’s Account Aggregators handled 148 million data-sharing requests, with 40 million successfully fulfilled. This system has played a crucial role in enhancing credit access for micro and small businesses, aligning with India’s financial inclusion goals.
Even in markets with high adoption, challenges remain.
Consumer awareness and trust in Open Banking remain limited, with many users fearing data misuse or security breaches.
For example, while Brazil and South Korea have seen rapid uptake, banks in other regions argue that lack of compelling use cases hinders consumer demand.
Australia’s government allocated AUD 88 million to support smaller banks in adopting Open Banking, yet user numbers remain low.
This highlights the need for strong public education efforts and incentives for businesses to integrate open banking services.
Key Questions for Future Open Banking Models
- Should APIs be standardised?
- Brazil, India, and South Korea adopted centralized API standards, ensuring interoperability.
- A decentralised approach could foster greater cybersecurity resilience but requires clear regulatory guidelines.
- How should third-party providers be regulated?
- Licensing third-party providers may increase consumer trust but could slow market competition.
- Allowing banks to choose their partners may create barriers for new entrants.
- Should Open Banking include payment initiation?
- Payment initiation is crucial for unlocking the full potential of Open Finance.
- However, regulators must balance enabling innovation with ensuring financial system stability.
- What adjacent infrastructure is needed?
- Strong payments infrastructure is essential.
- Integration with digital identity systems can further expand financial inclusion and security.
The Future of Open Finance
As new markets adopt Open Banking, the shift toward Open Finance appears inevitable.
Countries like the UAE are planning an ambitious big bang launch in 2026, incorporating lending and insurance from the outset.
Meanwhile, regulatory developments in cross-border payments and digital identity solutions will shape the next phase of financial services.
The long-term impact of Open Banking extends beyond payments – it could serve as the bridge between traditional banking and emerging financial technologies such as decentralised finance (DeFi) and AI-powered financial agents.
As digital assets and tokenized finance grow, adapting Open Banking frameworks to connect conventional banking with blockchain-based financial systems could be the next major evolution.
Ultimately, the success of Open Banking will depend on inclusive regulatory design, strong infrastructure, and continuous innovation, ensuring that consumers and businesses alike benefit from greater financial transparency and efficiency.
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