HKMA launches consultation on opening up banks’ systems to third parties

The Hong Kong Monetary Authority has invited comments on a proposal to allow third parties greater access to banks’ systems, with a view of improving the experience for customers.

The proposal, one of the HKMA’s so-called seven initiatives for a smart banking system, follows similar reforms in the EU, Singapore, Japan and Australia. The United Kingdom is the furthest on in this regard, and its “open banking” regime will come into force on Saturday .

The consultation document, published late on Thursday, sets out the monetary authority’s approach towards open application programme interfaces (APIs) in the banking industry, and asks for comments from industry players.

APIs are the rules that govern how one piece of computer software communicates with another. If banks adopt an open API approach, this will enable third party providers – in most cases technology companies – to shake up the way financial services are offered to consumers.

This could include making payments through social messaging platforms, or allowing platforms to make personalised mortgage recommendations to consumers, using a consumer’s own data rather than the best rate offered by banks.

“The fact that the HKMA has launched a consultation paper is a positive development, and Hong Kong is still among the first places to do so,” said Hoi Tak Leung, a Hong Kong-based counsel at law firm Ashurst. “The document is rather high level, and there are a number of key aspects that will need to be reviewed in more detail as the consultation progresses.”

These aspects include some areas where there is the greatest scope for innovation, such as opening up transactions and customers’ account information to third parties, which will be reviewed at the end of this year; and how liability would be assessed should consumers’ data be misused after it has been passed to third party providers, Leung said.