BB for data sharing to further financial inclusion
Open banking, which allows sharing data among banks, financial institutions and fintech with customers' consent, can further enable financial inclusion and easier access to financing for small and medium enterprises (SMEs), experts said yesterday.
Open banking provides open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions using application programming interfaces (APIs).
"In the new ecosystem of open banking, the APIs are a channel for doing business," said Jayanta K Bhowmick, a senior systems analyst (additional director) at Bangladesh Bank.
"Adopting and deploying the APIs, banks can extend and enhance their services and offerings," he said.
"It is erroneously believed that open banking makes the customer's data openly available to anyone," he said.
"But it puts effort on controlling both the circle of eligible third parties and letting the customers control sharing of their financial data, by requiring their explicit consent," he explained.
Bhowmick was addressing a roundtable styled "API and Open Banking: New service innovation for banks and fintech companies" organised by the Bangladesh Association of Software and Information Services (BASIS) at a hotel in Dhaka on Wednesday.
"With open banking, the digital value chain of banking gets opened up, allowing third parties to participate in the previously closed value chain," he added.
He said open banking was an efficient system which can absorb shocks in extreme situations like Covid-19, simplify know your customer processes, overcome issues over a lack of documentation and enable person-to-person lending and crowdfunding.
"It also encourages healthy financial behaviours, 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 supportive guidelines and a standardisation process so that they can share data based on customer consent maintaining data privacy and security.
Todd Schweitzer, founder and CEO of Brankas, an open banking fintech company operating in the Philippines and Singapore, said customers own their financial data and should be able to access their financial products beyond bank-owned channels.
The system needs technology, products, and policies that enable customers to securely use financial services from qualified third-party providers, he added.
The roundtable also emphasised that if any user wants to share the data with any third party to get any financial services, such as loans, the custodian banks should have provisions for sharing the data.
Md Khurshid Alam, an executive director of Bangladesh Bank, said shared the central bank's commitment to provide the required policy and regulatory support for open banking in Bangladesh.
He said the central bank would facilitate innovation by young fintech entrepreneurs by giving them all kinds of regulatory support. He suggested banks engage in greater collaborations with local fintech companies.
Fahim Mashroor, chairman of the BASIS's standing committee on fintech and CEO of bdjobs.com, said open banking was the best way to solve the big problem of the low loan disbursement ratio of banks to the micro and SME segment.
The problem of high operational cost for banks for micro and SME loan disbursement and repayment can be solved by open banking-based digital lending, he said.
Russell T Ahmed, president of the BASIS, and Fahim Ahmed, a vice president, were also present.